Federal Taxation of Oil and Gas Transactions

Federal Taxation of Oil and Gas Transactions on the LexisNexis® Tax Center provides analytical insight into key current developments and decisions in the federal courts and at the IRS that impact the federal tax treatment of the oil and gas business, including but not limted to:

  • Deduction for intangible Drilling and Development Costs (IDC). The Service has issued a coordinated issue Paper on the deduction of IDC by leveraged partnerships, addressing the use of partnerships by investors in certain drilling operations to claim losses and current deductions for IDC in amounts that exceed both the partnerships' actual IDC and the investors' economic outlay. Federal Taxation of Oil and Gas Transactions --§§ 8.04, 8.05, and 15.04.
  • Limit on Losses and Credits From Passive Activities. Grouping rules for the passive loss limitation affect oil and gas activities. Under the general grouping rules, one or more trade or business activities or rental activities may be treated as a single activity if the activities constitute an appropriate economic unit for the measurement of gain or loss. Generally, whether activities constitute an appropriate economic unit and, therefore, may be treated as a single activity depends upon all the relevant facts and circumstances. A taxpayer may use any reasonable method of applying the relevant facts and circumstances in grouping activities. Variousfactors candetermine whether activities constitute an appropriate economic unit for the measurement of gain or loss. Federal Taxation of Oil and Gas Transactions -§- 15.03.
  • Tax Credits Relating to Production and Use of Oil and Gas. The IRS has provided interim guidance, pending the issuance of regulations, relating to the credit for carbon dioxide sequestration. To be eligible for the credit, the taxpayer must own an industrial facility where the carbon dioxide capture equipment is placed in service; therefore, a purchaser of sequestered carbon dioxide is not eligible for the credit. For qualified carbon dioxide that is disposed of or stored, it must not be used as a tertiary injectant.. For further insight, see Federal Taxation of Oil and Gas Transactions -- § 15.10.
  • Exemptions from Manufacturer's Excise Tax on Gasoline Relating to Nontaxable Dyed Fuels. For discussion of the dyeing requirements for exemption from excise tax on dyed fuels, see Federal Taxation of Oil and Gas Transactions -- §18.04.
  • Depreciation and Accelerated Cost Recovery. For regulations adopted for small refiners claiming deduction for cost of complying with EPA requirements on sulfur, see Federal Taxation of Oil and Gas Transactions -- §13.01.

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