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Many oil production companies prefer to lease land for oil production. As capital assets such as oil land may fluctuate in value, oil land leasing shifts risks to the lessor, but if the property market has shown steady growth over time, a business that depends on leased oil land may be sacrificing capital gains. Depreciation of capital assets such as oil land has different tax and financial reporting treatment from ordinary business expenses. Oil land lease payments are considered expenses, which can be set off against revenue when calculating taxable profit at the end of the relevant tax accounting period. An expert knowledgeable in oil land leasing can help an owner of oil business determine the best path to take when it comes to oil land leasing.
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