Partnership Taxation and Oil and Gas Assets . By Roger D. Aksamit Thompson & Knight LLP Houston, Texas Brian Dethrow Jackson Walker L.L.P. Dallas, Texas. State Bar of Texas Section of Taxation/Energy and Natural Resources Webcast-November 6, 2008.
Partnership Taxation andOil and Gas Assets
By Roger D. Aksamit
Thompson & Knight LLP
Jackson Walker L.L.P.
State Bar of Texas
Section of Taxation/Energy and Natural Resources
Webcast-November 6, 2008
A.Express and Resulting Partnerships from Ownership of Oil and Gas Assets
D.IRC § 613A and Allocation of Depletable Basis
E.Allocation Rules With Respect to Depletable Basis, Depletion and Simulated Depletion
F.Miscellaneous Issues With Respect to Allocating Depletion
I. Other Partnership Rules Relating to Depletion
J.Form Partnership Agreement Provisions
1. Joint Operations
2. Election Out – History
Note: No formal election is required if the parties’ intent is clear. (This is the so-called “deemed election out.”) Also, note that a member can object to election out within 90 days. Treas. Reg. § 1.761 – 2(b)(i).
--- no revenues on the return?
3.Keep your own method under Section 704(c).
4.Can the partners capital accounts ever go negative? Is a QIO necessary?
--- note: tax partnership has no debt.
---note: gas balancing, if allowed under the JOA.
5.Party with the IDCs should avoid early liquidation of the partnership.
6.Can the tax partnership distribute a property to the partners?
No Texas nexus
Distributive share not apportioned to TX
Texas oil and gas properties
Unrelated GP (or affiliate contract operator), so passive
Positive Capital Account Balances
Balancing allocations at liquidation
Single Property with $5M of gain
Sufficient gain to allocate in year of liquidation to overallocate gain
to Management Members to bring capital accounts to 95/5 ratio.