Oil & Gas Benefits

TAX ATTRIBUTES:

EACH PROSPECTIVE PARTICIPANT SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO ANY AND ALL TAX MATTERS. INVESTING IN OIL AND GAS COULD RESULT IN CONSIDERABLE LOSSES DUE TO THE FACT THAT DRILLING IS EXPLORATORY AND NEVER DEFINITE.

Allocation from a Partnership Investment

The Partnership will annually file a partnership information return with the IRS and, following the close of its taxable year, will provide to each Partner a schedule indicating the Partner's allocable share of items of income, gains, loss, deduction or credit. A Partner's distributive share of such Items will generally be determined in accordance with the allocation provisions of the Partnership Agreement provided such allocations either have substantial economic effect or, taking into account all facts and circumstances, are in accordance with the Partners' Interests in the Partnership. Should there be a sale or disposition of the Partnership's interest in gas properties, a large part of any gain as well as a large part of the amount realized upon sale of a Unit, may be treated as ordinary income to the partners.

Intangible Drilling and Development Costs (IDCs)

Huntley structured its oil and gas investments as Limited Partnerships. One major benefit of investing in our oil and gas partnership is the Intangible Drilling and Development Costs. The Participant General Partners and Limited Partners (those which do not limit investor liability) will fund and be allocated for federal tax purposes, generaly 100% of the Program's Intangible Drilling and Development Costs. You may either deduct this as an expense or capitalize IDCs.

Depletion

The owner of an economic interest in an oil or gas property, including a partner in a partnership owning such an interest, is entitled to take into account on his or her own federal income tax return a deduction for cost depletion or, if he or she qualifies and subject to limitations, the greater of cost depletion or percentage depletion allowable by reason of the "independent producer's exemption." Cost depletion for any year is determined by dividing the adjusted tax basis for the oil and gas interest by the total units of gas or oil expected to be recoverable from such interest as of the beginning of the year and then multiplying the resultant quotient by the number of units actually sold during the year. Percentage depletion is 15% of the wells annual gross income.

IN EVALUATING THE TAX BENEFITS OF AN INVESTMENT IN A PARTNERSHIP, PROSPECTIVE PARTICIPANTS SHOULD CONSIDER THAT THE TAX BENEFITS OF PROJECTED LOSSES MAY BE LIMITED BY THE PASSIVE ACTIVITY LOSS RULES AND MAY BE OFFSET IN PART BY AN ADDITIONAL LIABILITY UNDER THE ALTERNATIVE MINIMUM TAX. PROSPECTIVE PARTICIPANTS SHOULD CONSULT WITH THEIR PERSONAL TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE ALTERNATIVE MINIMUM TAX PASSIVE ACTIVITY LOSS RULES.