Correct, we own units not stock in the royalty trusts. The trusts did not send us information and E*TRADE and Morgan Stanley provided little supplemental information about them. However, each trust has a depletion calculator on its website that I can calculate depletion with (cost depletion). Question on that though – can I also deduct depletion on the original units purchased or only on the royalty distributions?
As far as the situation I explained about E*TRADE combining the royalty distributions from both trusts into one income entry on the 1099-MISC (box 2), which is incompatible with reporting the information correctly on Sch E: should I make two separate royalty trust entries on Sch E and divide up the income amount shown in box 2 between the two trust entries in the way it should be? Or will this create an issue with the IRS (too bad there isn’t a comment field on Sch E to explain this kind of thing!)?
Finally, regarding the deductibility of the Severance taxes" and "Administrative transaction fees”: Are these deductible as expenses on Sch E, or are they not deductible?
If not deductible, can they be added to the basis of the units purchased by reinvestment of the royalty distributions they were charged on?
Thanks for any help you can provide on this.
