Louisiana Land & Exploration Co. v. Commissioner
United States Tax Court
Petitioner held operating mineral interests from which it carved out overriding royalties that it transferred to a trust for the benefit of its shareholders. Petitioner then distributed to its shareholders units of beneficial interest in the trust.
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Petitioner held operating mineral interests from which it carved out overriding royalties that it transferred to a trust for the benefit of its shareholders. Petitioner then distributed to its shareholders units of beneficial interest in the trust. Held, petitioner did not dispose of "oil, gas, or geothermal property" as that term is defined in sec. 1254, I.R.C. 1954, as amended and in effect in 1983, and is, therefore, not required to "recapture" the IDC previously deducted which related to the subject operating mineral interests.
1Opinion of the Court
OPINION
Goffe, Judge:
The Commissioner determined a deficiency in petitioner’s Federal income tax for the taxable year 1983 in the amount of $16,976,702. The parties have settled all of the adjustments to petitioner’s tax liability contained in the statutory notice of deficiency except one. The sole issue to be decided is whether petitioner must, under the provisions of section 1254 of the Internal Revenue Code, “recapture” intangible drilling and development costs (IDC) as ordinary income when it carved overriding royalties out of the working interests it held in oil and gas leases and…
2Cases cited12 opinions
- Burton-Sutton Oil Co. v. CommissionerSupreme Court of the United States · 1946
- Commissioner v. Southwest Exploration Co.Supreme Court of the United States · 1956
- Kirby Petroleum Co. v. CommissionerSupreme Court of the United States · 1946
- Standard Oil Co. v. CommissionerUnited States Tax Court · 1981
- United States v. W. H. CockeCourt of Appeals for the Fifth Circuit · 1968
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3Cited by2 opinions
- Southland Royalty Co. v. United StatesUnited States Court of Claims · 1991
- Louisiana Land & Exploration Co. v. CommissionerUnited States Tax Court · 1989