
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC776]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                 Subchapter K--Partners and Partnerships
 
         PART IV--SPECIAL RULES FOR ELECTING LARGE PARTNERSHIPS
 
Sec. 776. Special rules for partnerships holding oil and gas 
        properties
        

(a) Computation of percentage depletion

    In the case of an electing large partnership, except as provided in 
subsection (b)--
        (1) the allowance for depletion under section 611 with respect 
    to any partnership oil or gas property shall be computed at the 
    partnership level without regard to any provision of section 613A 
    requiring such allowance to be computed separately by each partner,
        (2) such allowance shall be determined without regard to the 
    provisions of section 613A(c) limiting the amount of production for 
    which percentage depletion is allowable and without regard to 
    paragraph (1) of section 613A(d), and
        (3) paragraph (3) of section 705(a) shall not apply.

(b) Treatment of certain partners

                           (1) In general

        In the case of a disqualified person, the treatment under this 
    chapter of such person's distributive share of any item of income, 
    gain, loss, deduction, or credit attributable to any partnership oil 
    or gas property shall be determined without regard to this part. 
    Such person's distributive share of any such items shall be excluded 
    for purposes of making determinations under sections 772 and 773.

                       (2) Disqualified person

        For purposes of paragraph (1), the term ``disqualified person'' 
    means, with respect to any partnership taxable year--
            (A) any person referred to in paragraph (2) or (4) of 
        section 613A(d) for such person's taxable year in which such 
        partnership taxable year ends, and
            (B) any other person if such person's average daily 
        production of domestic crude oil and natural gas for such 
        person's taxable year in which such partnership taxable year 
        ends exceeds 500 barrels.

                    (3) Average daily production

        For purposes of paragraph (2), a person's average daily 
    production of domestic crude oil and natural gas for any taxable 
    year shall be computed as provided in section 613A(c)(2)--
            (A) by taking into account all production of domestic crude 
        oil and natural gas (including such person's proportionate share 
        of any production of a partnership),
            (B) by treating 6,000 cubic feet of natural gas as a barrel 
        of crude oil, and
            (C) by treating as 1 person all persons treated as 1 
        taxpayer under section 613A(c)(8) or among whom allocations are 
        required under such section.

(Added Pub. L. 105-34, title XII, Sec. 1221(a), Aug. 5, 1997, 111 Stat. 
1007.)
