Definitions for "Intangible Drilling Costs"
Expenditures, deductible for federal income tax purposes, incurred by an operator for labor, fuel, repairs, hauling, and supplies used in drilling and completing a well for production.
Expenditures made by an operator for labor, fuel, repairs, hauling and supplies used in drilling and completing a well for production. Intangible drilling costs include also the construction of derricks, tanks, pipelines on the lease, buildings, and preparation of the drill site but does not include the cost of materials or equipment. A rule of thumb is: do the items for which expenditure were made have any salvage value? If not, they qualify under the tax laws as intangible drilling costs.
All of the costs incurred by the joint venture in drilling of the oil and gas well to be drilled by the joint venture which are to be paid by the joint venture and which may be deducted for federal income tax purposes to the exercise of the option provided under Section 263(c) of the Code.