- 18 -
$3,300,000--only if production for all wells drilled and completed
by November 1, 1980, exceeded 30 barrels per day or 2 barrels per
day per completed well. Mr. Heitzman would have personally
assumed $130,683 of total liability of $3,300,000 had those
production goals been met. Nothing in the record indicates that
any oil was ever produced from the leased acreage.
In the second assumption agreement, Mr. Heitzman purported
to assume personal liability of up to $3,779 per unit (for a
maximum of $26,453) for payment of drilling and completion costs
incurred under the turnkey contract.
3. Petitioner’s Knowledge of Mr. Heitzman’s Purchase of an
Interest in Stonehurst
Mr. Heitzman decided to purchase an interest in Stonehurst
without any input from petitioner about the merits of the
investment. It is unclear from the record precisely when
Mr. Heitzman apprised petitioner about the Stonehurst purchase.
Petitioner was aware of the purchase prior to filing the 1979
joint income tax return. Regardless of when Mr. Heitzman told
petitioner about the transaction, he told her only that
Stonehurst “was in oil and gas”, would make some money, and was
a “tax shelter” that would be reflected in the 1979 return.
Mr. Heitzman never explained to petitioner any other aspects of
the Stonehurst investment as he then understood them. He did not
explain to her any attributes of Stonehurst as a tax shelter,
such as what minimum annual royalties or intangible drilling
costs were, nor give her any further information on Stonehurst as
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011