Exxon Corporation and Affiliated Companies - Page 14




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               After discussions and negotiations with regard to the                  
          information, Exxon's and respondent's representatives agreed that           
          costs relating to repair of Exxon's oil refineries that on                  
          Exxon's consolidated corporation income tax returns had been                
          expensed were to be capitalized as follows:                                 
                                                                                     
                    Year        Capitalized Refinery Repair Costs                     
                    1972                $ 9,807,560                                   
                    1973                8,084,376                                     
                    1974                11,963,680                                    
                    1975                4,515,610                                     
                    1976                2,504,448                                     

               In general, adjustments made by respondent that Exxon                  
          formally protested beyond the audit level to respondent's                   
          Appellate Division and/or in litigation represented issues of               
          importance to Exxon and to the oil and gas industry.  Examples of           
          such protested adjustments are the treatment of construction                
          costs of offshore drilling platforms as intangible drilling and             
          development costs and the eligibility of pipeline right-of-way              
          costs for depreciation and investment tax credits.                          
               For 1972 through 1978, respondent's audits concluded with              
          issuance to Exxon of Revenue Agent’s Reports (RAR’s).  Each RAR             
          summarized respondent's proposed adjustments and set forth                  
          proposed income tax deficiencies for each year.                             
               By the end of respondent’s audits of Exxon for 1972 through            
          1978, respondent had made hundreds of adjustments to Exxon’s                







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