Oil & Gas Tax Codes
Sec. 469 c.3
Passive activity losses and credits limited
(c)(3) Working interests
in oil and gas property
(A) In general
The
term “passive activity” shall not include any working interest in any oil or
gas property which the taxpayer holds directly or through an entity
which does not limit the liability of the taxpayer with respect to such interest.
(B) Income in
subsequent years
If any taxpayer has any loss for any taxable year from a working
interest in any oil or gas property which is treated as a loss which is not
from a passive activity, then any net income from such property (or any property
the basis of which is determined in whole or in part by reference to the basis
of such property) for any succeeding taxable year shall be treated as income of
the taxpayer which is not from a passive activity.
Sec. 263.
Capital expenditures
(a) General rule
No deduction shall be allowed for –
(1) Any amount paid out
for new buildings or for permanent improvements or betterment made to increase
the value of any property or estate. This paragraph shall not apply to -
(A) expenditures for the
development of mines or deposits deductible under section 616,
(B) research and
experimental expenditures deductible under section 174,
(C) soil and water
conservation expenditures deductible under section 175,
(D) expenditures by
farmers for fertilizer, etc., deductible under section 180,
(E) expenditures for
removal of architectural and transportation barriers to the
handicapped and elderly which the taxpayer elects to deduct under section
190,
(F) expenditures for
tertiary injectants with respect to which a deduction is allowed under
section 193; (FOOTNOTE 1) or (FOOTNOTE 1) So in original. The semicolon
probably should be a comma.
(G) expenditures for
which a deduction is allowed under section 179.
(2)Any amount expended
in restoring property or in making good the exhaustion thereof for which an allowance
is or has been made.
((b) Repealed. Pub. L.
101-508, title XI, Sec. 11801(a)(16), Nov. 5, 1990, 104 Stat. 1388-520)
(c) Intangible drilling
and development costs in the case of oil and gas wells and geothermal wells
Notwithstanding subsection (a), and except as provided in subsection
(i), regulations shall be prescribed by the Secretary under this subtitle
corresponding to the regulations which granted the option to deduct as expenses
intangible drilling and development costs in the case of oil and gas wells and
which were recognized and approved by the Congress in House Concurrent
Resolution 50, Seventy-ninth Congress. Such regulations shall also grant the
option to deduct as expenses intangible drilling and development costs in the
case of wells drilled for any geothermal deposit (as defined in section
613(e)(2)) to the same extent and in the same manner as such expenses are
deductible in the case of oil and gas wells. This subsection shall not apply
with respect to any costs to which any deduction is allowed under section 59(e)
or 291.
(i) Special rules for
intangible drilling and development costs incurred outside the
In the case of intangible drilling and development costs paid or
incurred with respect to an oil, gas, or geothermal well located outside
the United States –
(1) subsection (c)
shall not apply, and
(2) such costs shall –
(A) at the election of
the taxpayer, be included in adjusted basis for purposes of computing the
amount of any deduction allowable under section 611 (determined without regard
to section 613), or
(B) if subparagraph (A)
does not apply, be allowed as a deduction ratably over the 10-taxable year
period beginning with the taxable year in which such costs were paid or
incurred. This subsection shall not apply to costs paid or incurred with respect to a
nonproductive well.
Sec. 461.
General rule for taxable year of deduction
TITLE
26, Subtitle A, CHAPTER 1, Subchapter E, PART II, Subpart C, Sec. 461.
STATUTE
(a) General
rule
The amount of any deduction or credit allowed by this
subtitle shall be taken for the taxable year which is the proper taxable year
under the method of accounting used in computing taxable income.
(i)
Special rules for tax
shelters
(2) Special rule for spudding of oil or gas
wells
(A) In general
In the case of a tax shelter, economic performance with
respect to amounts paid during the taxable
year for drilling an oil or gas well shall be treated as having occurred within
a taxable year if drilling of the well commences before the close of the 90th
day after the close of the taxable
year.