Rev. Rul. 80-2

1980-1 C.B. 61, 1980-1 I.R.B. 13.

                       Internal Revenue Service
                                 Revenue Ruling

          INTANGIBLE DRILLIND AND DEVELOPMENT COSTS; OPTION TO DEDUCT

                           Published: January 7, 1980

26 CFR 1.263(c)-1: Intangible drilling and development costs in the case of oil and gas wells.

(Also Section 612, 1.612-4.)

  Intangible drilling and development costs; option to deduct. Section 263 of the Code, as amended by the Energy Tax Act of 1978 to grant an option to deduct intangible drilling and development costs incurred with respect to geothermal wells, does not permit a new election for the treatment of such costs for oil and gas wells.

FACTS

  Section 263(c) of the Internal Revenue Code, as amended by the Energy Tax Act of 1978, section 402(a), 1978-3 (Vol. 2) C.B. 27, provides that the Secretary shall prescribe regulations that grant an option to deduct intangible drilling and development costs (IDC) incurred by an operator in the drilling of geothermal wells.  The election to charge to capital or to expense IDC incurred in the drilling of geothermal wells is separate from the election provided for oil and gas wells.  S. Rep. No. 95-1324, 95th Cong., 2d Sess. 72 (1978), 1978- 3 (Vol. 2) C.B. 344, 345.

HOLDING

  Section 263(c) of the Code, as amended, grants an option to charge to capital or to expense IDC incurred in the drilling and development of geothermal wells, but does not permit a new election for the treatment of IDC for oil and gas wells.  See section 1.612-4(e) of the Income Tax Regulations for the treatment of IDC incurred in the drilling and development of oil and gas properties.

Rev. Rul. 80-2, 1980-1 C.B. 61, 1980-1 I.R.B. 13.