Applying the uniform capitalization rules to oil and gas properties

Article Abstract:

The uniform capitalization, or unicap, rules appear applicable to a number of oil and gas production costs, despite the intangible drilling costs (IDC) exception. Although the exception excludes most expenses, applicable preproduction expenses and interest must be capitalized. The unicap rules are inapplicable to IDC expenses such as fuel, supplies, repairs, and salaries, which constitute the majority of drilling-related costs.

Public Finance Activities, Tax Deductions & Exemptions, OIL AND GAS EXTRACTION, Oil & Gas Extraction, United States, Laws, regulations and rules, Gas industry, Capital investments, Oil fields, Tax deductions, Natural gas exploration, Tax exclusion, Petroleum mining, Oil and gas exploration, Petroleum exploration, Oil well drilling

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Oil and gas investments: the depletion tax preference controversy

Article Abstract:

Controversy exists about which costs can be used in the adjusted property basis for the excess percentage depletion allowance for oil and gas. IRC section 57(a)(1) defines the depletion tax preference using adjusted property. Hill v US allows ordinary meanings for adjusted basis and as a result the IRS has received over $400 million in tax refund claims.

Investments

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Supreme Court excludes tangible property from adjusted basis of mineral deposit for AMT purposes

Article Abstract:

The US Supreme Court removed tangible property from an adjusted basis in United States v. Hill. The basis was for a mineral depletion allowance under the alternative minimum tax. The Court used an analogy to a sale under IRC section 1016. The Court also found that a contrary use of basis would create an economic multiplier effect which was undesirable.

Minimum tax, Basis (Taxation)

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