This section contains responses to specific questions raised by our readers. In this issue are: Transfer of Unproved Property with Retention of Production Payment, Effects of Post-Balance Sheet Price Decline on Full Cost Ceiling, Units-of-Revenue Basis of Amortization For Full Cost Company

The Accounting Forum. Fall/Winter 1985, pp. 1‑6.

Mr. Harms and Mr. Gutierrez explain why publicly traded limited partnerships have become so popular and important in the last two years. The advantages and disadvantages are described. The authors then explain how an MLP is formed and examine the tax considerations and accounting considerations involved in MLPs. Finally, the authors discuss the administrative aspects of MLPs.

Oil and Gas Master Limited Partnerships. Harms, Ted E. and Guiterrez, Johnny R., Fall/Winter 1985, pp. 7‑16.

Because of the large number of companies that have installed enhanced recovery projects using C02 injections in the past two years, the Institute of Petroleum Accounting recently conducted a survey of companies believed to be engaged in C02 projects. This article reports on the practices being used by thirteen companies to account for the cost of injected CO2, injection facilities, injection costs, separation costs, and for recovered C02.

Accounting for C02 Injection Costs. Fall/Winter 1985, pp. 17‑22.

Mr. Kirkland analyzes major aspects of the Proposed Regulations issued in 1983, interpreting Internal Revenue Code Section 704. The article focuses on the requirement that "special allocations" must have "substantial economic effect." Mr. Kirkland explains and illustrates the capital accounts that must be maintained under the Proposed Regulations.

An Introduction to Oil and Gas Partnership Allocations under the Proposed Section 704 Regulations. Kirkland, Kelly J., Fall/Winter 1985, pp. 23‑40.

Messrs. Chambers and Russell explain why petroleum exchanges are made. They then illustrate typical entries made in the inventory records and the exchange ledger to record deliveries and receipts of crude. Accounting entries to record the transactions are demonstrated. Reporting requirements and tax considerations are discussed.

Accounting for Petroleum Exchanges. Chambers, Thomas E. and Russell, Todd A., Fall/Winter 1985, pp. 41‑60.

Dr. Deakin reviews the historical and economic evidence and concludes that the windfall profit tax is based on profits. He discusses the definition of profit, and the Congressional history of the WPT, placing particular emphasis on the objectives of the tax. The author also uses other sources to support this arguments for the profits-based nature of the WPT, an approach used by several states in disallowing the WPT as a deduction in computing the state income tax.

Are Windfall Profits, Profits? Deakin, Edward B., Fall/Winter 1985, pp. 61‑72.

Mr. Dole suggests that in preparing a financing proposal. an oil and gas company should start with assessing its own strengths and weaknesses and develop a business plan based on this assessment. Various potential financing sources are discussed and from this list the company selects the source that best suits its needs and develops a strategy for approaching that source. The proposal document is then discussed in some detail.

Preparing a Successful Oil and Gas Financing Proposal. Dole, Richard D., Fall/Winter 1985, pp. 73‑80.

Mr. Hensen discusses how the new S Corporation rules makes the S Corporation more akin to a partnership. He examines the initial "at risk" amount and the initial limitation on deductible losses under Sec. 1366(d)(l). The factors that decrease or increase the at-risk amount and the stockholder's stock basis and the basis of loans to the corporation are discussed. The carryover of disallowed losses is explained. Finally, the significance of corporate versus shareholder borrowing is reviewed.

The New S Corporation Rules Applied to the Oil Industry—an Analysis of the Applicable Loss Limitations. Henson, Robert A., Fall/Winter 1985, pp. 81‑98.

Mr. Mark analyzes some of the changes in the Subchapter S Revision Act of 1982 and their impact on the economic interest and the depletable property concepts for oil companies operating as S Corporations. The problem of allocation of the basis of ]eases is examined in some detail. The potential problems arising from prorate allocations on a daily basis are then discussed.

The New S Corporation Rules Applied to the Oil Industry—Some Alternative Views of the Economic Interest Rules. Mark, Richard S., Fall/Winter 1985, pp. 99‑106.

Mr. Ratliff reviews the general provisions of I.K.C. Sec. 1254. requiring the recognition of ordinary income to the extent of the amount of "adjusted intangible drilling and development costs" in certain situations. He then discusses the taxable dispositions of a divided interest, the nontaxable disposition of a divided interest, the taxable or nontaxable disposition of an undivided interest, a mixed disposition of an interest, and the disposition of a non-operating portion of a property.

Recapture of Intangible Drilling and Development Costs upon Disposition of a Portion of a Property. Ratliff, R. Byron, Fall/Winter 1985, pp. 107‑113.