oil and gas royalties and QBI

[2016year]

trying to determine is oil and gas royalties (within a partnership entity) are eligible for the QBI?

[itonewbie]

Royalties are inherently passive.  Working interest is a different story.

[2016year]

That’s what I was thinking, but in doing some research, I found an article by KPMG that said they are not eligible, and then another article by Deloitte that said they were. IRS doesn’t seem to want to say, as I did further research, so I was thinking maybe there is some current rulings or cases that help one to further determine whether royalties are eligible for QBI

[2016year]

Oh... and in my research, I found somewhere, I don’t remember where... maybe the IRS, that said passive enterprises can qualify for QBI

[itonewbie]

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@2016year wrote:

That’s what I was thinking, but in doing some research, I found an article by KPMG that said they are not eligible, and then another article by Deloitte that said they were. IRS doesn’t seem to want to say, as I did further research, so I was thinking maybe there is some current rulings or cases that help one to further determine whether royalties are eligible for QBI

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That's why you need to distinguish royalties vs working interest.  Those articles you cited go into great lengths to explain the technicalities.  You may like to re-read them in details.

[itonewbie]

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@2016year wrote:

Oh... and in my research, I found somewhere, I don’t remember where... maybe the IRS, that said passive enterprises can qualify for QBI

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The safe harbor is only applicable to rental real estate enterprises.  Sounds like you may be confused.  Here're the documents you may like to reference.

https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-other-guidance-on-new-qualified-bu...