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Oil & Gas Royalty

JMReedy
Level 2

I am working with a new client who has Oil & Gas Royalties. I understand that I need a Schedule E for each company. However, I have a copy of the previous year's tax record and I do not see how the numbers add up to what was on the form provided. There is several years of depletion with a negative "less carryover to future year". I do see where to put the "other deductions" and "production taxes". How do I get the "depletion" amount. Is there a worksheet I am missing? Thank you for your assistance. I have never had a client with Oil & Gas Royalties.

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sjrcpa
Level 15

And there are limits on how much may be deductible. Hence the carryover you see on last year's return.


Ex-AllStar

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5 Comments 5
TimW1
Level 2

You manually calculate it at 15% of revenue and enter it.

sjrcpa
Level 15

And there are limits on how much may be deductible. Hence the carryover you see on last year's return.


Ex-AllStar
JMReedy
Level 2

Am I to assume that Oil & Gas Royalties are not considered a "Qualified Business"? I have checked no because I think of it more like an investment.

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qbteachmt
Level 15

"I need a Schedule E for each company"

Company they run, or company that pays them?

Did your taxpayer get multiple 1099-Misc? Do they have lease (rent) payments, working interest, royalties, overriding royalties? More than one property or property type?

If you are completely new to this, I found a nice starter article:

https://accountants.intuit.com/taxprocenter/tax-law-and-news/basic-tax-reporting-of-oil-and-gas-rela...

 

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JMReedy
Level 2

The client is paid royalties from a company under "Oil & Gas Royalty". I think I have it figured out now. Thank you for the article.