Final answer:
Intangible drilling costs are generally deductible in the year they are incurred or amortized over 60 months and do not need to be capitalized and depleted. This treatment allows immediate tax benefits for companies involved in exploration and drilling activities.
Step-by-step explanation:
The statement that intangible drilling costs must be capitalized and written off through depletion is false. Intangible drilling costs (IDCs) are expenses related to drilling wells for oil, natural gas, or geothermal projects that have no salvageable value. In the United States, these costs are generally considered deductible by the IRS and can be deducted either in the year they are incurred or amortized over a 60-month period, according to the taxpayer's preference.
IDCs typically include expenses for labor, chemicals, mud, grease, and other miscellaneous items necessary for drilling but do not include the drilling equipment. Such costs can be a significant part of the total cost of drilling a well and are treated differently from tangible drilling costs, which are typically capitalized and recovered through depletion.