Exxon Corporation and Affiliated Companies - Page 10




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          Exxon’s income tax return preparers as not resulting in the                 
          discovery of commercially exploitable energy resources and                  
          therefore as currently deductible business expenses.                        
               During the audits for the years in issue, Exxon’s and                  
          respondent’s representatives generally agreed as to the                     
          applicable law relating to the treatment of G&G costs.  They                
          generally understood that to the extent they could agree that               
          information provided during the audits to respondent's                      
          representatives established which particular G&G activity led to            
          the discovery of commercially exploitable energy resources, the             
          related G&G costs would be disallowed as current expenses and               
          would be treated as nondeductible capital expenditures.                     
               Upon receipt during the audits from Exxon's representatives            
          of information regarding particular G&G activity that had                   
          occurred in a year, respondent's representatives would review and           
          analyze the information, discuss the information with Exxon's               
          representatives, make inquiries with regard thereto, and                    
          negotiate with Exxon's representatives over whether such                    
          information established that particular G&G activity had or had             
          not led to the discovery of commercially exploitable energy                 
          resources and whether the related costs should be treated as                
          ordinary expenses or as capital expenditures.                               
               The following schedule for 1972 through 1978 reflects the              
          amount of claimed G&G costs that, on audit by respondent, were              






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Last modified: May 25, 2011