Keller v. Commissioner
United States Tax Court
In 1973, K acquired a $ 50,000 limited partnership interest in an oil and gas drilling program sponsored by Amarex, Inc. Issue 1: The drilling partnership participated in the drilling of 182 wells, approximately two-thirds of which were drilled pursuant to pay-as-you-go contracts, and the balance, pursuant to contracts prepaid in December 1973. The drilling partnership elected to expense certain items as intangible drilling costs (IDC) under sec. 263(c), I.R.C. 1954.…
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In 1973, K acquired a $ 50,000 limited partnership interest in an oil and gas drilling program sponsored by Amarex, Inc. Issue 1: The drilling partnership participated in the drilling of 182 wells, approximately two-thirds of which were drilled pursuant to pay-as-you-go contracts, and the balance, pursuant to contracts prepaid in December 1973. The drilling partnership elected to expense certain items as intangible drilling costs (IDC) under sec. 263(c), I.R.C. 1954. Respondent accepted the IDC classification. He also allowed deductions in 1973 for amounts paid in 1973 on the pay-as-you-go…
1Opinion of the Court
Nims, Judge:
Respondent determined a deficiency in petitioners’ income tax of $14,202 for 1973. The issue for decision is whether petitioners are entitled to deduct $50,000 in 1973 as their distributive share of the Amarex Drilling Program, Ltd-72/73 partnership losses. The resolution of this question depends upon the resolution of the following underlying issues: (1) Whether Amarex Drilling Partnership No. 72/73-D is entitled to deduct $635,560.71 in 1973 for prepaid intangible drilling and development costs; and (2) whether Amarex Drilling Partnership No. 72/73-D is entitled to deduct…
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