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 there of 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((b) Repealed.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.
(d) Expenditures in connection with certain railroad rolling stock
In the case of expenditures in connection with the rehabilitation
of a unit of railroad rolling stock
(except a locomotive) used by a domestic common carrier by railroad
which would, but for this
subsection, be properly chargeable to capital account, such expenditures,
if during any 12-month
period they do not exceed an amount equal to 20 percent of the
basis of such unit in the hands of
the taxpayer, shall, at the election of the taxpayer, be treated
(notwithstanding subsection (a)) as
deductible repairs under section 162 or 212. An election under
this subsection shall be made for
any taxable year at such time and in such manner as the Secretary
prescribes by regulations. An
election may not be made under this subsection for any taxable
year to which an election under
subsection (e) applies to railroad rolling stock (other than locomotives).
((e) Repealed. Pub. L. 97-34, title II, Sec. 201(c), Aug. 13, 1981,
95 Stat. 219)
(f) Railroad ties
In the case of a domestic common carrier by rail (including a railroad
switching or terminal
company) which uses the retirement-replacement method of accounting
for depreciation of its
railroad track, expenditures for acquiring and installing replacement
ties of any material (and
fastenings related to such ties) shall be accorded the same tax
accounting treatment
as expenditures for replacement ties of wood (and fastenings related
to such ties).
(g) Certain interest and carrying costs in the case of straddles
(1) General rule
No deduction shall be allowed for interest and carrying charges
properly allocable to personal
property which is part of a straddle (as defined in section 1092(c)).
Any amount not allowed as a
deduction by reason of the preceding sentence shall be chargeable
to the capital account with
respect to the personal property to which such amount relates.
(2) Interest and carrying charges defined
For purposes of paragraph (1), the term ''interest and carrying
charges'' means the excess of -
(A) the sum of –
i) interest on indebtedness incurred or continued to purchase or
carry the personal property, and
(ii) all other amounts (including charges to insure, store, or
transport the personal property) paid
or incurred to carry the personal property, over
(B) the sum of -
(i) the amount of interest (including original issue discount)
includible in gross income for the
taxable year with respect to the property described in subparagraph
(A),
(ii) any amount treated as ordinary income under section 1271(a)(3)(A),
1278, or 1281(a) with
respect to such property for the taxable year,
(iii) the excess of any dividends includible in gross income with
respect to such property for the
taxable year over the amount of any deduction allowable with respect
to such dividends under
section 243, 244, or 245, and
(iv) any amount which is a payment with respect to a security loan
(within the meaning of section
512(a)(5)) includible in gross income with respect to such property
for the taxable year. For
purposes of subparagraph (A), the term ''interest'' includes any
amount paid or incurred in
connection with personal property used in a short sale.
(3) Exception for hedging transactions
This subsection shall not apply in the case of any hedging transaction
(as defined in section
1256(e)).
(4) Application with other provisions
(A) Subsection (c)
In the case of any short sale, this subsection shall be applied
after subsection (h).
(B) Section 1277 or 1282
In the case of any obligation to which section 1277 or 1282 applies,
this subsection shall be
applied after section 1277 or
1282.
(h) Payments in lieu of dividends in connection with short sales
(1) In general If -
(A) a taxpayer makes any payment with respect to any stock used
by such taxpayer in a short sale
and such payment is in lieu of a dividend payment on such stock,
and
(B) the closing of such short sale occurs on or before the 45th
day after the date of such short
sale, then no deduction shall be allowed for such payment. The
basis of the stock used to close the
short sale shall be increased by the amount not
allowed as a deduction by reason of the preceding sentence.
(2) Longer period in case of extraordinary dividends
If the payment described in paragraph (1)(A) is in respect of an
extraordinary dividend, paragraph
(1)(B) shall be applied by substituting ''the day 1 year after
the date of such short sale'' for ''the
45th day after the date of such short sale''.
(3) Extraordinary dividend
For purposes of this subsection, the term ''extraordinary dividend''
has the meaning given to such
term by section 1059(c); except that such section shall be applied
by treating the amount realized
by the taxpayer in the short sale as his adjusted basis in the
stock.
(4) Special rule where risk of loss diminished
The running of any period of time applicable under paragraph (1)(B)
(as modified by paragraph
(2)) shall be suspended during any period in which (A) the taxpayer
holds, has an option to buy,
or is under a contractual obligation to buy, substantially identical
stock or securities, or (B) under
regulations prescribed by the Secretary, a taxpayer has diminished
his risk of loss by holding 1 or
more other positions with respect to substantially similar or related
property.
(5) Deduction allowable to extent of ordinary income from amounts
paid by lending broker for
use of collateral
(A) In general
Paragraph (1) shall apply only to the extent that the payments
or distributions with respect to any
short sale exceed the amount which - (i) is treated as ordinary
income by the taxpayer, and
(ii) is received by the taxpayer as compensation for the use of
any collateral with respect to any
stock used in such short
sale.
(B) Exception not to apply to extraordinary dividends
Subparagraph (A) shall not apply if one or more payments or distributions
is in respect of an
extraordinary dividend.
(6) Application of this subsection with subsection (g) In the case
of any short sale, this subsection
shall be applied before subsection (g).
(i) Special rules for intangible drilling and development costs
incurred outside the United States
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.
DISCLAIMER:
The substance of this is furnished for information purposes only
and is not to be construed as a tax opinion or an offer to buy or sell securities, and it is not to be considered a solicitation to purchase or sell a security. The information contained herein is based on sources Provide Energy L.L.C believes to be reliable, and Provide Energy makes no guarantee nor any representation as to the completeness and/or accuracy of the statements or summaries of the available data herein.Each individual should rely solely on the advice or recommendation of their legal and/or
financial advisor.. This information is provided as of the date of its entry onto this website and issubject to change without notice.
|
