Rev. Rul. 83-62

1983-1 C.B. 113.

                       Internal Revenue Service
                                 Revenue Ruling

    PERCENTAGE DEPLETION; EXCEPTION TO DISALLOWANCE; TRANSFER OF PROVEN OIL
                      AND GAS PROPERTIES;  REORGANIZATION

                           Published: April 11, 1983

SECTION 613A. - -LIMITATIONS ON PERCENTAGE DEPLETION IN CASE OF OIL AND GAS WELLS

(Also Section 368; 1.368-1.)

  Percentage depletion; exception to disallowance; transfer of proven oil and gas properties;  reorganization.  An "F" reorganization involving a single entity does not cause a "transfer" of proven oil and gas properties within the meaning of section 613A(c)(9)(A) of the Code.

ISSUE

  Will the described reorganization under section 368(a)(1)(F) of the Internal Revenue Code of a corporation owning proven oil and gas properties cause a "transfer," within the meaning of section 613A(c)(9)(A) of the Code, of the proven oil and gas properties?

FACTS

  X is a corporation organized in state M that owns proven oil and gas properties.  In a transaction that qualified as a reorganization within the meaning of section 368(a)(1)(F) of the Code, X changed its name to Y and also changed its state of incorporation by merging into a newly created corporation in state N.

LAW AND ANALYSIS

  Section 613A(a) of the Code provides that the allowance for depletion under section 611 for oil and gas wells is to be computed without regard to section 613, which provides for the percentage depletion allowance.  However, a limited exception to this disallowance of percentage depletion is provided by section 613A(c)(1) for certain taxpayers for specified quantities (tentative quantities) of oil and gas production.  Section 613A(c)(9)(A) provides that this exception to the disallowance of percentage depletion does not apply to a transferee of proven oil and gas property transferred after December 31, 1974.

  Under section 368(a)(1)(F) of the Code the term "reorganization" includes a mere change to identity, form, or place of organization, however effected.

  A "transfer" for purposes of section 613A(c)(9) of the Code means any change in legal or equitable ownership by sale, exchange, gift, lease, sublease, assignment, contract or other disposition (including any contribution to or any distribution by a corporation, partnership, or trust), any change in the membership of a partnership or the beneficiaries of a trust, or any other change by which a taxpayer's proportionate share of the income subject to depletion of an oil or gas property is increased.  In the present case no disposition has taken place and no change has occurred by which a proportionate share of the income subject to depletion has been increased.  The only change has been the mere change in corporate identity and state of incorporation.

HOLDING

  The described reorganization under section 368(a)(1)(F) of the Code is not a  "transfer" of proven oil and gas properties within the meaning of section 613A(c)(9)(A) of the Code.

Rev. Rul. 83-62, 1983-1 C.B. 113.