I have a K-1, and as a general partner, I had IDC deductions, which should be an active loss based on section 263C. But turboTax treat this as passive loss, how to fix?

[vol2Smile]

I tend to think this is a TurboTax bug, but I don't have a customer service number to call...

[Vanessa A]

Is the company actively involved in the drilling?  Or is this an investment?  If this is an investment, and you are not an active participant in the company, then it would be treated as passive income.

Please provide more details on  your situation. 

[vol2Smile]

The company is actively involved in drilling, they raised funds from investors to do that and has been doing this for several years.  I contacted the company, and get the following:

"As a GP investor the loss is an active loss not passive. The investor takes this loss as active because they are theoretically at risk of liability. This falls under section 263c(see tax handbook)".

Since this is my first year doing this, and I don't use a CPA (the company says most of their investors use CPA, so they are not aware of this turboTax issue.  But they think being identified by the software as a passive investor is causing me to lose some of the tax credit (coming from IDC deduction should be able to offset most of the income type). 

Please let me know how to fix this problem, thanks.

[Vanessa A]

As you walk through the K-1 entries in TurboTax, you will come to a question asking if you materially participated.  Say no.

After that question, Is this an oil or gas property will be asked?  Say yes IF your liability is not limited.  If your liability IS limited, you do not qualify as an active participant and it will be taxed as a passive activity. 

[vol2Smile]

I tried several ways, still could not find the question of "whether you materially participated" ?  Is there any way you could provide more info, e.g. several screenshots before that question showed up in turboTax software?

If you guys have a direct line I could call, that will speed things up a lot. My number is [phone number removed]. email: [email address removed].

Thanks.