This is my first year completing the return for the customer. Prior preparer did not input information using oil and gas schedule. The depletion amount is being properly calculated for the working interest, but is appearing on the balance sheet Sch M-1 and M-2, even though depletion is in excess of basis.
Percentage depletion is being calculated, as the customer does not have any basis for cost depletion based on the type of oil lease. The percentage depletion is then flowing to schedule M-1 and M-2 in turn affecting the capital account balance.
