Client is paid Royalties to allow a gas driller to drill on his land. IS this considered to be a Qualified Business for the 20% deduction?

Forum|Forum|6 years ago
December 7, 2019
2 replies
14 views

Client received royalties from a gas driller on his property. Is this considered to be qualified business income?

ProSeries Professional

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Best answer by IRonMaN

Unless he is out there helping them drill, it doesn't sound like a business. I'm guessing his time involvement is pretty much cashing the checks when they come?

IRonMaNAnswer

Level 15

Unless he is out there helping them drill, it doesn't sound like a business. I'm guessing his time involvement is pretty much cashing the checks when they come?

Slava Ukraini!

PhoebeRoberts

Intuit Community Champion

That's not dispositive, but the conclusion is right.

PhoebeRoberts

Intuit Community Champion

If your guy owns the surface rights, any payment he got for allowing the drilling to proceeds isn't royalties (and isn't QBI).

If your guy owns the mineral rights, the payment's not related to where the wellbore is; a well drilled on someone else's land that tapped the reservoir running under his land would still be paying him based on production.

Royalties are statutorily portfolio, and aren't eligible for QBI. Don't forget to take depletion.

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