Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

entering royalty depletion on a partnership return

Highlighted
Level 2

please help!  I cannot figure out for the life of me how to get the 15% royalty depletion to show up on the K-1, box 20, code T.  Piece of cake when doing the individual returns, but not so much for the 1065.

To be clear, I have one royalty ($400k+) that the partnership received, I have 4 partners that will get K-1s.  I have found where to enter the royalty income, and the deductions (production taxes) for box 13-w - but cannot find where to enter the depletion (I do realize that I have to calculate it myself, unlike in the individual model).

Labels (1)
1 Solution

Accepted Solutions
Highlighted

You don't have to calculate tentative depletion yourself! The input through the O&G screen is exactly the same as on the 1040. There's an O&G statement to the K-1 that shows gross income, royalty deducts, percentage depletion for regular tax and AMT, and depletion in excess of basis.

View solution in original post

5 Replies 5
Highlighted

You don't have to calculate tentative depletion yourself! The input through the O&G screen is exactly the same as on the 1040. There's an O&G statement to the K-1 that shows gross income, royalty deducts, percentage depletion for regular tax and AMT, and depletion in excess of basis.

View solution in original post

Highlighted
Level 2

Thanks Phoebe, that got me started!  My frustration was that the 15% depletion was showing up as "in excess of basis" so that neither the partnership or the partners got to take the depletion, and all the partners were showing a negative capital.  I then chose to ignore the depletion (book basis vs federal basis), the program still calculates the depletion and lists it under the O&G sheet as "in excess of basis", but their individual capital now shows correctly.  I then added a note on the supplemental information to tell the partners to add in the depletion on the partner level.  

0 Cheers
Highlighted

Depletion in excess of basis is the good answer! You get to take the deduction and don't reduce your basis in the partnership.

Highlighted

Also, how did this partnership acquire its royalty interest, such that it's getting $400k of royalties but has no basis? 

0 Cheers
Highlighted
Level 2

All the royalties, less production taxes and property taxes are paid out to the partners through distributions.  Conversely, if an individual receives the royalty, the royalty company does not reduce the royalty payment by depletion, it is up to the individual to claim the depletion on his/her tax return.  

As far as basis goes, this land was in the family for generations - they discovered oil on the land.  The family is splitting the royalty payments and claiming the income on their individual tax returns (less depletion).

0 Cheers