Investment credit with respect to oil and gas well and lease equipment;

              The Investment Credit With Respect to Oil and Gas Well and Lease Equipment
by PRESLEY S. FORD, JR. Partner, Tulsa Office
Presented before the Tulsa Chapter of The Oklahoma Society of Certified Public Accountants—December 1962
HE INVESTMENT CREDIT provisions of the Revenue Act of 1962
present a challenge to all accountants. Nowhere are the prob­lems
more complex than in the case of the credit as it relates to oil and gas well and lease equipment. Without benefit of regulations, rulings, or court decisions the author is forced to express merely personal opinions. These are not necessarily the views of his firm and you may agree or differ as you study the problems encountered in the course of your work.
All will agree with the general proposition that oil and gas well lease equipment is section 38 property. It is tangible property. It is depreciable property. As a class it has a useful life in excess of four years. Whether it is personal or real property under the law of the state is not relevant for the reason that not only tangible personal property but real property used in manufacturing, production, or ex­traction
qualifies. A lease building and its structural components would be an exception to this general rule. (Section 48(a)(1)),
Oil and gas well and lease equipment has a guideline class life of fourteen years. The Senate Finance Committee Report, however, states:
An estimated useful life must be assigned to each separate prop­erty.
Thus, if a taxpayer is using a multiple-asset account, he must assign a useful life to each asset in such account for the purpose of computing his qualified investment. If a taxpayer is using a method of depreciation, such as the units of production method, which does not measure useful life in terms of years, he must estimate useful life in years in order to compute his qualified investment.
SECTION 38 PROPERTY
USEFUL LIFE
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