Impact of the Tax Reform Act of 1984 on prepaid intangible drilling costs

Journal Article · Sat Jun 01 04:00:00 EDT 1985 · Oil Gas Tax Q.; (United States)

OSTI ID:5588727

Rogers, R

Most of the revenue-raising provisions of the Tax Reform Act of 1984 (TRA) aim at tax-sheltered investments that rely on favorable tax rules to attract investors. Oil and gas drilling programs often derive much of their success from the right of investors to expense intangible drilling costs (IDC) as incurred, a benefit which can be further enhanced by expensing prepaid IDC in the year prior to actual drilling. Based on congressional intent and prior case law regarding Code Section 263(c), the author concludes that Section 446(b) is inapplicable in the effort to make the prepaid IDC deduction subject to the distortion-of-income test. When a valid business reason necessitates a prepayment of IDC, the Internal Revenue Service should not be able to postpone the deductibility based on the distortion-of-income rule.

• Research Organization: Price Waterhouse, Dallas, TX
• OSTI ID: 5588727
• Journal Information: Oil Gas Tax Q.; (United States), Journal Name: Oil Gas Tax Q.; (United States) Vol. 33:4; ISSN OGTQD
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700* -- Petroleum-- Economics
Industrial
& Business Aspects
03 NATURAL GAS
030600 -- Natural Gas-- Economic
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
294000 -- Energy Planning & Policy-- Fossil Fuels
ACCOUNTING
CASE LAW
DRILLING
FINANCIAL INCENTIVES
INDUSTRY
INVESTMENT
LAWS
LEGAL ASPECTS
NATIONAL ORGANIZATIONS
NATURAL GAS INDUSTRY
PETROLEUM INDUSTRY
TAX LAWS
US DEPARTMENT OF TREASURY
US IRS
US ORGANIZATIONS
WELL DRILLING