adjusting QBI for depletion/IDC in a partnership with a passive loss not allowed in current year

[Je9]

I have a client who has a passive oil partnership where the K1 shows ordinary income in box 1, IDC expenses in box 13j and depletion in box 20t.  For the QBI information it explicitly state it has NOT been adjusted for either IDC or depletion.  How do I adjust QBI for those items - example below

Box 1 ordinary income  $8,000

Box 13J IDC                       $7,000

Box 20 T                              $3,500

Net Passive loss               ($2,500)  no passive income for 2023 so loss is disallowed and carried forward

Box 20Z shows   $8.000  which is showing up in the 8995 calculation and taking a QBI deduction for the $8K, which is wrong.  I tried putting the $10,500 of reductions in the other deduction box but then the ($2,500) actually reduced QBI income (client has active businesses with QBI income) which I also believe is wrong because the loss is being carried over to 2024.

How do I make the adj in Lacerte so it doesn't factor in the ($2,500 for QBI in 2023 and carries it forward to 2024

[PhoebeRoberts]

1) First make sure the entity isn't taxed as a general partnership for 2023. If it is, the O&G activity isn't passive because O&G working interests not held in a liability-limiting entity are statutorily non-passive. It's pretty common for the deal to be put together as a general partnership for the drilling year(s) and to flip to a limited partnership once the well pays out.

2) If you're expensing IDCs, enter the net negative $2,500 in the Ord Bus Inc (Loss) column of 20Z.

The people who wrote the QBI regs and forms instructions did not envision that anyone would have significant complex pass-through QBI activities, and the mechanical rules about netting losses against income are super weird.

[Je9]

Thanks Phoebe - this partnership is old enough that it has flipped over to limited (though I don't think the "once the well pays out" ever worked real well on this one) so I do need to make the adjustment.  I will enter the negative as you suggest.  QBI is beyond super weird and it sure makes tax returns a lot more "exciting"

[PhoebeRoberts]

After years of QBI losses (where all I cared about was that the carryforward was correct), I now have a complicated return with 1200 lines of QBI activity and positive net QBI even after using up all the carryforwards. My Excel to figure out what the QBI deduction with the activity-level limits ought to be is ridiculous.

[Je9]

sorry for a follow up but I still don't think this is working correctly.  In my example above, the taxpayer has a $2,500 passive loss that is NOT allowed for 2023 but will need to carry forward.  When I enter the ($2,500) onto 20Z under ordinary bus inc/(loss) it is still flowing through to form 8995A and decreasing the QBI income for the year (client has positive from another business).  I thought that if the passive loss was disallowed, it didn't affect QBI for the current year but would be carried forward to a future year, when the passive loss was actually recognized.  Is that not correct?

If it is correct, is there some checkbox I need to check to have it carry forward instead of deducting?

[Je9]

never mind - there was some user error - it looks like it is working now.  Thanks for the advice!!