PhoebeRoberts
Level 11
12-07-2019
02:10 AM
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Working interests held directly (as opposed to through a liability-limiting entity) are statutorily nonpassive. Royalties are statutorily portfolio (which is also not passive income).
The royalties are clearly not QBI, because portfolio income isn't QBI. I'd sign a return taking the position that the working interests were QBI - they're enough of a ToB to give rise to SE tax, after all.