Tax benefits and direct investment access are two of oil and gas’s main draws for accredited investors, and Fred Hubler traces the opportunity back to a 1942 government push to boost domestic energy production, which still creates tax-saving opportunities today. Most of these programs start as a temporary general partnership obligation and automatically convert to a limited partnership once qualifications are met, letting investors earn passive income without being involved in day-to-day operations, while investment companies can also provide direct access and handle the due diligence.
Hubler notes oil and gas ranks among the most profitable commodity spaces for accredited investors, though these direct investments are less liquid than traditional ones. On the numbers, he points out that investing in an oil and gas direct partnership typically allows investors to write off about 70%-80% of the investment against taxable income, though the exact figure depends on the investor’s tax situation. Some of these programs sell the underlying development in an estimated 5 years, returning capital (with expected upside) that investors can then reinvest to defer another year of income taxes.
Oil and gas may not be glamorous, but the tax math here is hard to ignore.
Hubler covers the full picture on Forbes, Oil And Gas On The Run: Will You Ride The Coattails?