Caltex Oil Venture v. Comm'r
United States Tax Court
C, an accrual-basis partnership, entered into a turnkey contract under which it paid $5,172,666 by cash and note in December 1999 for the drilling of two oil and gas wells.
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C, an accrual-basis partnership, entered into a turnkey contract under which it paid $5,172,666 by cash and note in December 1999 for the drilling of two oil and gas wells. Although some site preparation required under the contract occurred in 1999, no drill penetrated the ground for purposes of drilling a well by or on behalf of C within 90 days after the end of 1999. C claimed a full deduction for the $5,172,666 as intangible drilling costs (IDCs) on its 1999 Federal tax return. R issued a notice of final partnership administrative adjustment to P, C's tax matters partner, determining,…
1Opinion of the Court
OPINION
Gustafson, Judge:
On November 13, 2007, the Internal Revenue Service (irs) issued a notice of final partnership administrative adjustment (FPAA) for taxable year ending December 31, 1999, to Caltex Management Corp., the tax matters partner (tmp) of Caltex Oil Venture. (It is the latter entity — Caltex Oil Venture — to which we refer herein as “Caltex”.) This case is a partnership-level action based on a petition filed by the TMP pursuant to section 6226.1 The matter is currently before the Court on the IRS’s motion for partial summary judgment filed pursuant to Rule 121, which asks us…
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