§638 — Continental shelf areas
5 cases·1 followed·2 distinguished·2 cited—20% support
Statute Text — 26 U.S.C. §638
For purposes of applying the provisions of this chapter (including sections 861(a)(3) and 862(a)(3) in the case of the performance of personal services) with respect to mines, oil and gas wells, and other natural deposits—
the term “United States” when used in a geographical sense includes the seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the United States and over which the United States has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources; and
the terms “foreign country” and “possession of the United States” when used in a geographical sense include the seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the foreign country or such possession and over which the foreign country (or the United States in case of such possession) has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources, but this paragraph shall apply in the case of a foreign country only if it exercises, directly or indirectly, taxing jurisdiction with respect to such exploration or exploitation.
No foreign country shall, by reason of the application of this section, be treated as a country contiguous to the United States.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.638-1 Continental Shelf areas
- Treas. Reg. §Treas. Reg. §1.638-1(a) General rule.
- Treas. Reg. §Treas. Reg. §1.638-1(b) Exercise of taxing jurisdiction.
- Treas. Reg. §Treas. Reg. §1.638-1(c) Scope.
- Treas. Reg. §Treas. Reg. §1.638-1(d) Natural deposits and natural resources.
- Treas. Reg. §Treas. Reg. §1.638-1(e) Rights under international law.
- Treas. Reg. §Treas. Reg. §1.638-1(f) Examples.
- Treas. Reg. §Treas. Reg. §1.638-2 Effective date
5 Citing Cases
Its principal position is that section 638 does not apply because the project sites were not actively producing oil and gas.
ogical and geophysical expenses paid or incurred in connection with the exploration for, or development of, oil or gas within the United States (as defined in section 638) shall be allowed as a deduction ratably over the 24-month period beginning on the date that such expense was paid or incurred." We hold that the expenses are deductible under section 167(h).