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its original percentage depletion NIL, Petroleum generally
included the same amounts as overhead (indirect expenses) and
followed the same apportionment procedures as were included and
followed in its original WPT NIL computations.
In the petitions filed in these cases, petitioners asserted
for the first time that they should be permitted to modify their
allocation process for computing the WPT NIL.14 During May and
September of 1995, petitioners provided respondent with a revised
apportionment formula for computing the WPT NIL. To the amounts
that were included in overhead in their original computations,
petitioners contend that they should be permitted to include as
additional overhead six new categories of indirect costs, which
petitioners claim are attributable to the mining process. In
their revised computations, petitioners also changed their method
for allocating overhead among producing properties and between
gas and oil on a single property from actual revenue to
production, using a conversion ratio derived from relative market
prices of gas and oil.
Discussion
Respondent determined the following deficiencies in WPT for
the taxable periods of 1983, 1984, and 1985, respectively:
14 Respondent did not raise this issue in the notices of
deficiency.
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