How do I enter information from a Grantor Letter?

[DorothyJ]

Hi @Wherman396  & @Jacker ,

Sorry to have been MIA--I just now got around to sitting down with my taxes yesterday & today.  

I followed the guide put out by Hines.  It's intimidating and nerve-wracking, but I got through it with only the Sch D error about 'sale price must be greater than zero'.  I used the workaround suggested by W and it worked like a charm (with the added beauty, in my estimation, of giving the correct result)!  Thank you!

I don't know about the rest of you, but I'm glad to see this REIT put to bed.  My financial advisor has me in a few other REITs--I sure hope the liquidation of those goes more smoothly!  (An actual K1 form would be nice.)

Best regards,

Dorothy

[blazman]

Hello.  I have received a yellow "letter" from SABINE ROYALTY TRUST.  It contains a box indicating where I should place the numbers in a Schedule E.  However, I can't seem to find how I go about doing this.  This is NOT A PARTNERSHIP.  It says, "we are considered a grantor trust, not a partnership and do not have the same reporting requirements that a partnership has.  That is why you DO NOT receive a K-1.   The cash distributions are reported on a 1099-MISC form by your broker.

So, this already appears and has been imported from my Schwab account.  I want to ensure that I am NOT PAYING tax twice on it.  But, I can't seem to figure out where to enter the following line items they provided on this sheet:

GROSS ROYALTY INCOME (It says list on Schedule E, line 4)

SEVERANCE TAX (It says to list on Schedule E, line 16)

ADMINISTRATION EXPENSES (It says to list on Schedule E, line 19)

DEPLETION (It says to list on Schedule E, line 18) ... but it says to "calculate manually!"  This is a real dilemma!

I am using the desktop version of TurboTax Premier.

Thank you!

[DaveF1006]

 To clarify, is this reported on your own individual account or a business trust account (1041)?

[blazman]

Hi Dave:

Thanks for the response!  It is on my personal income tax form … 1040. 

[Jacker]

Just making a guess...the 1099-Misc you imported must have had an income amount in Box 2 - Royalties? If so was a Schedule E created with that amount automatically entered on Line 4? Did you check to see if TurboTax created the Schedule E under forms?

[DaveF1006]

Yes, i am in agreement with jacker in that it appears that a 1099 MISC has been imported in your program.  If so, this automatically will generate a Schedule E.  If you use an online version of Turbo Tax, you will not be able to view a Schedule E unless you pay for the program. If you use the desktop version, you can go to forms and verify if the information was reported correctly as prescribed in the yellow letter. 

If you are unable to determine if the information is correct and using Turbo Tax Online, you may wish to  have us take a look at it. If so, here is the procedure to have us take a look.

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions: 

If using Turbo Tax online:

1. Click on Tax Tools in the left menu bar
2. Click on Tools>share my file with agent
3. press ok and you should get a token number

At the top menu in the black line at the top of the page go to Online. 

1. From the menu, select Send Tax File to Agent. 
2. You will see a message explaining what the diagnostic copy is. Click Send and then you will get a Token number. 
3. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

@blazman 

[blazman]

Yes ... you are correct.  The 1099-MISC did include royalties in Box 2.  And yes, it did link to a Schedule E.  However, I wasn't sure what to name this Schedule E ... because the amount from the 1099-MISC was a total of $1,946.34 ... but it is comprised of $634.25 from SABINE ROYALTY TRUST and $1,312.09 from another trust ... NORTH EUROPEAN OIL.  So, line 4 does have the total amount of $1,946.34.  Is this the proper way to section out two different payments on Schedule E of a royalty payment?  I put "North European Oil and Sabine Royalty Trust" in the area of "property description."

I am using the desktop version ... so I can see the forms.

I went to the "Online" menu at the top of TurboTax and found a place to "Share Screen Code."  I am assuming you can use this ???  It is:  097 110.  There is also an option to "send tax file to agent" if that is more appropriate?

[DaveF1006]

Actually i don't need to see the forms since you can view these. A combined payment is sufficient as long as the totals are correct. it is not necessary to name the Schedule E just as long as the totals are correct. 

Now are the expenses you just mentioned listed correctly on the Schedule E in lines 16, 18, and 19?  if not, then send me the tax file using the send  tax file to agent option.  Let me know the token number once you do this.

[blazman]

No.  There is no data on those lines.  That's my dilemma ... getting the data from the yellow letter I received from Sabine into TurboTax.  I won't get a K-1 from Sabine because they said it's a grantor trust and not a partnership.  For North European Oil I think I will get a K-1 ... I just haven't yet.

Ok.  I have clicked on sent a file to an agent ... the number is:  1111348.

I have to get the following in there:

GROSS ROYALTY INCOME:  $634.26

SEVERANCE TAX:  -$64.90

ADMIN EXPENSE:  -$12.36

NET CASH DISTRIBUTED:  $558.89

I obviously just am concerned about double entering the data ... since the 1099-MISC already spit the number in there!

If you need anything further, please let me know what I can provide.  Thank you so much!

[DaveF1006]

Here is the best way to enter your royalty property without a 1099 MISC.

1. Login and continue your return.
2. Select Federal>wages and income>
3. Rental Properties and Royalties>Rental Properties and Royalties (Sch E)
4. Answer the first question Yes.
5. Continue until you reach the Rent and Royalty Summary
6. Select add another Rental or Royalty at the bottom of the page.
7. now when it asks is this a rental property or Royalty, select Royalty
8. Now give it the best description possible including the address if you have it.
9. Answer the next question yes or no
10. Then answer what type of royalty income is it.
11. Then it asks for your royalty information.  Put in the gross amount for royalty income
12. For taxes paid, put in $64.90 leave the box regarding 1099 MISC blank
13. Next box will report the depletion amount automatically. Then click on more expenses to add.
14. Finish out the section until you reach a royal summary page.
15. Scroll down to expenses.  Scroll through each screen until you get to a screen that says says any miscellaneous expenses. Record administrative expense and $12 as the amount.
16. For the next few screens, just press done at the bottom. You have finished recording everything.
17. Now you will have a properly recorded Schedule E for this new activity.
18. Now this royalty information will not generate a separate Schedule E.  What it will do is report in one of your Schedule E's that you already generated.  in this case, it will appear in Column C. Iin my mock example when i worked through this, it appeared in Column C in Copy 2 but may report in Copy 1. 
19. Just remember a Schedule E can report up to 3 rental or royalty properties in a single Schedule E.
20. Now if you look at  column c, Gross income will appear in Box 4.  The administrative fee will appear in Box 19.  management fee. The tax is properly recorded in Box 16.

@blazman 

[blazman]

Dave:

Thank you so much.  I just went thru and executed the steps you provided ... and worked as you said!  

One question ... in my ameteur mind is seems as if I am paying tax on this twice.  It was imported as a lump sum when I imported via my Schwab statement (1099-MISC - $634.25) and again when I just completed these steps to place the $634.25 on a Schedule E (I saw the tax due click up when I added this amount!).  Am I looking at it incorrectly?  Just want to be sure I'm not paying more than I need to!  The same actually goes for the other ones that I actually received a K-1 for.

Also, one other question please.  Several of the other K-1s have the box checked on line 16 that says "Schedule K-3 is attached if checked."  However, it isn't attached.  When I called two of the companies, one said it wouldn't be available until June ... the other said not until August!  I'm not sure what this K-3 will do to my taxes (I know it's something about international payments, taxes or something?!) ... but should I file in April before the deadline and then wait for these K-3s and then need to file an amended return?  My other thought was to file an extension and wait for these and file then?  This is all new to me ... and kind of a pain.  Not sure what most do in this instance?  (I still have one of these oil trusts that haven't even send me a K-1 as of today!).  It's the only outstanding one I have at this time.

Thanks again for all your assistance!

[DaveF1006]

I looked at your 1099 MISC's and i don't see where (1099-MISC - $634.25) is reflected anywhere. Where is this recorded as a lump sum payment? i am sure Sabine sent you the letter not realizing the income was already reported by Charles Schwab, if it was reported as a lump sum like you mentioned.

My question to you is though, are you sure the income was reported elsewhere? If so, then you will want to remove the entry that I suggested making and not be concerned if it isn't reported separately a on Schedule E despite what the yellow letter instructed you to do.

If it is a lump payment reported elsewhere, it would be difficult to separate it to have it reported separately on a Schedule E. Also, if this amount is part of a larger total on a 1099 MISC, then it probably is reflected in a Schedule E embedded in a larger total. 

As far as the k-3's, if you haven't received these yet, don't try to report these on your own. File without them and leave the box unchecked for Box 16. once you receive these, then i recommend you file an amendment. it won't be necessary to file an extension because a K-3 does not generate income that will result in a tax liability. it is used to claim a foreign tax credit if you earned foreign income in another country and paid tax on thiat income in the other country.

@blazman 

[blazman]

I went thru the Schedule E very closely again via the "forms" option in TT ... and it sure seems like I am "double counting" data that was imported from the Schwab 1099-MISC ($1,946 - comprised of $1,312.09 from North European Oil and $634.25 from Sabine).  Because there are line items in the E separately with $634 and $1,312 in two other columns, as well as the $1,946 in another column ... that are all rolling up to Schedule 1 (Form 1040), line 5 (additional income).

I am being somewhat proactive and clicking on "sending tax file to agent" again.  I was hoping you can look it over to see if you come to the same conclusion that I have?  Here is the token number:  1111552.

Thank you SO much!

[blazman]

Dave:

Sorry ... I think our two messages just crossed in "cyber-space!"

Yes ... my 1099-MISC is a total of $1,946.34.  It says on the Schwab statement that this number is comprised of the following:

North European Oil:  $1,312.09

Sabine Royalty Trust:  $634.25

However, when you look at my Schedule E ... there are columns that contain all THREE numbers.  In other words:

1.  $1,946

2.  $1,312

3.  $634

That is why it seems to be I am double counting.

How would I go about remedying this to ensure everything is done for IRS correctly?

Thanks!

[DaveF1006]

Remove the entry that I instructed you to make last night. Go to the Rent and Royalty Summary  and select the trash icon next to the entry made. To get there;

1. Open your return
2. Select Federal>wages and income>
3. Rental Properties and Royalties>Rental Properties and Royalties (Sch E)
4. Answer the first question Yes.
5. Continue until you reach the Rent and Royalty Summary. Here delete the entry you made last night by selecting the trash icon and this will remove all entries in Column C of the Schedule E.
6. Now go to the Schedule E in the summary that the original 1099 MISC was linked to and add in the taxes paid, administrative expense, and depletion that i mentioned last night. This will be 15% of the $634, which should be $95.

{Edited 03/31/23} (10:00 PM PST} @blazman