Page:United States Statutes at Large Volume 90 Part 2.djvu/66

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1534

26 USC 263.

" (A) the aggregate amount of expenditures after December 31, 1975, which are allocable to such property and which have been deducted as intangible drilling and development costs under section 263(c) by the taxpayer or any other person and which (but for being so deducted) would be reflected in the adjusted basis of such property, adjusted as provided in paragraph (4), or " (B) the excess of— " (i) the amount realized (in the case of a sale, exchange, or involuntary conversion), or the fair market val«e of the interest (in the case of any other disposit i o n), over " ( i i) the adjusted basis of such interest, shall be treated as gain which is ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle. "(2)

"Oil or gas property."

DISPOSITION OF PORTION OF PROPERTY.—For purposes of

paragraph (1) — " (A) I n the case of the disposition of a portion of an oil or gas property (other than an undivided interest), the entire amount of the aggregate expenditures described in paragraph (1)(A) with respect to such property shall be treated as allocable to such portion to the extent of the amount of the gain to which paragraph (1) applies. " (B) I n the case of the disposition of an undivided interest in an oil or gas property (or a portion thereof), a proportionate part of the expenditures described in paragraph (1)(A) with respect to such property shall be treated as allocable to such undivided interest to the extent of the amount of the gain to which paragraph (1) applies. T h i s paragraph shall not apply to any expenditures to the extent the taxpayer establishes to the satisfaction of the Secretary that such expenditures do not relate to the portion (or interest therein) disposed of. " (3) O I L OR GAS PROPERTY.—The term 'oil or g a s property ' means any property (within the meaning of section 614) with respect to which any expenditures described in paragraph (1)(A) are properly chargeable. " (4) SPECIAL RULE FOR PARAGRAPH (i)(A). — I n a p p l y i n g p a r a -

g r a p h (1)(A), the amount deducted for intangible drilling and development costs and allocable to the interest disposed of shall be reduced by the amount (if any) by which the deduction for depletion under section 611 with respect to such interest would have been increased if such costs incurred (after December 31, 1975) h a d been charged to capital account rather than, deducted. " (b) SPECIAL RULES U N D E R EEGULATIONS.—Under regulations p r e -

scribed by the Secretary— " (1) rules similar to the rules of subsection (g) of section 617 and to the rules of subsections (b) and (c) of section 1245 shall be applied for purposes of this section; and " (2) in the case of the sale or exchange of stock in an electing small business corporation (as defined in section 1371(b)), rules similar to the rules of section 751 shall be applied to that portion of the excess of the amount realized over the adjusted basis of the stock which is attributable to expenditures referred to in subsection (a)(1)(A) of this section."

�