S/V Drilling Partners, Snyder Armclar Gas Company, Tax Matters Partners - Page 2




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               Dom W. Greco, for petitioner.                                          
               Michael A. Yost, Jr. and Edward F. Peduzzi, Jr., for                   
          respondent.                                                                 
                                       OPINION                                        

               COLVIN, Judge:  On August 3, 1998, respondent issued two               
          notices of final partnership administrative adjustment to S/V               
          Drilling Partners (S/V), a partnership, in which respondent                 
          determined adjustments to S/V’s partnership returns for the tax             
          years ending December 31, 1993 and 1994.  On August 18, 1998,               
          Snyder Armclar Gas Co. (Snyder), S/V’s tax matters partner,                 
          petitioned the Court to redetermine respondent’s adjustments to             
          partnership items.                                                          
               In 1993 and 1994, S/V sold 32,410 barrels of oil equivalent            
          (BOE’s)1 of natural gas produced from nonconventional sources,              
          consisting of 15,483 BOE’s of gas produced from a tight formation           
          that was not Devonian shale and 16,927 BOE’s of gas produced from           
          both a tight formation and Devonian shale.                                  
               The issue for decision is the amount of S/V’s section 29               
          credit.  We hold that S/V is allowed a section 29 credit equal to           
          (1) 15,483 times $3, and (2) 16,927 times $3 indexed as provided            
          in the first sentence of section 29(b)(2).                                  


               1  A barrel of oil contains about 5.8 million British                  
          thermal units (Btu’s).                                                      






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