(Pardon any posting issues - I haven't gotten around to
paying news.individual.net, it being the middle of tax
season and all, and Google Groups has a horrible posting
interface.)

- quote -

Extend (which shouldn't be a big deal for the S-corps).
IMHO, you're in over your head. Honestly, you're in over my
head, so I'm going off of Pat Hennessee's Oil & Gas Guide
(from CCH).

Assuming you have O&G working interests, working interests
can only be aggregated if they're on the same tract or
parcel. And if they're on the same tract or parcel, they're
deemed to be aggregated, unless you timely elected to treat
them as separate. So if P and Qs each have interests in 3
separate parcels, you can aggregate Qs' interest in Parcel A
with P's interest in Parcel A, but can't aggregate Qs'
interest in Parcels A, B and C.

If P has accumulated percentage depletion in excess of basis
on Parcel A, and aggregates with Qs' positive-basis interest
in Parcel A, that excess depletion will consume Qs' basis.
So watch out that you aren't creating a situation where
basis gets wasted.

If you're inclined to Google, the word you're looking for is
"depletable."

Phoebe

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Hello Group:

Any depletion experts out there?

3 QSubs and 1 S corp came from a prior accountant when a
client purchased the 4 corporations. Prior to the purchase,
the entities were all S Corporations owned by individuals.

Two of the entities, 1 Qsub and the parent, have depletiable
(if thats a word) property. Each entity has three separate
parcels that have the same operations. At this moment I am
unsure if the prior accountant prepared an election to
aggregate the depletiable property with common operations.
Let's say that the accountant didn't make this election for
each entity, so the companies are deemed to have elected to
treat each property as separate properties (if I understand
the regs).

Since the Qsub is deemed to have liquidated into the parent,
it's as if the parent acquired new depletiable property.

Can they make an election to aggregate all 6 properties (3
from parent and 3 from Qsub) now that they acquired new
property (3 properties from Qsub), can they only make an
election to aggregate the newly acquired 3 properties since
the parent's 3 properties had a prior election to treat them
separate, or must they all be treated as separate
properties?

I think they can either elect to aggregate the 3 properties,
or they are not allowed to make an election at all.

I apologize if I sound incoherent. I've never dealt with
depletion before, and tax season is getting me. Only 338.75
hours left in tax season!

Any thoughts?

Thanks in advance for the help.

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