•  
  •  
 

Abstract

In recent years, the Internal Revenue Service has succeeded in eliminating a number of tax-sheltering mechanisms by employing both changes in the tax laws and zealous-some would say overzealous-enforcement of tax law interpretations. While some of these mechanisms may have been abusive, others which were harmless and productive have also fallen victim to the wholesale assault. In July of 1982, with the Tax Court's decision in Keller v. Commissioner, one of the most widespread and traditionally favored tax-shelter vehicles, the oil and gas exploratory drilling fund, was placed on the endangered species list, its ultimate fate as yet undeterminable. Section II provides general background information on tax shelters and the oil and gas drilling limited partnership. Section III then lays out the history of intangible drilling and development costs (IDC) deductibility. Section IV begins the discussion of the Keller case, with Section V analyzing Keller under the previously established guidelines. Section VI moves on to discuss the new standard laid out by the Keller two-part test, and Section VII analyzes the Ninth Circuit’s one-year rule.

Share

COinS