Gas Lease Bonus & Royalty Income

[tshuter]

I received two 1099-MISC from a gas lease. They both pertain to the same property. One 1099 reports income from a bonus payment that is listed as "rental" in Box 1.  The other 1099 reports royalty income in Box 2. I am an owner of mineral rights and NOT an owner of the above ground real estate.

Upon review, I get an error regarding the bonus payment reporting that I must show the "rental" income and royalty income as separate properties on the Schedule E.  The error is flagged on the rental worksheet but when I look at the Schedule E form they are listed as separate properties in columns A & B. Can you help me resolve this issue?

A second error is also flagged on the rental worksheet that asks for days rented. If I enter a number then I am drawn into other real estate questions that are not relevant for a bonus payment.

Thanks

[JohnB5677 · Accepted solution]

To start with you should separate the Rental and Royalty transactions. 

You should post them as if they were on two different 1099-MISC forms.

1. Once you've entered the Rental information in Box 1 = Continue
2. Source of 1099-MISC Income
   1. Nonbusiness income from the rental of personal property or equipment Learn More
   2. Check the  Learn More in TurboTax
   3. This is money you receive for renting out property that is NOT real estate and NOT something you do as a business (nonbusiness income).

This will eliminate the issue of the Real Estate requirement.

[tshuter]

Thanks for the prompt response. Your suggested change was successful in separating the bonus payment from Schedule E income and moved it to Other Income 3f. However, the review still flags an error on the Schedule E worksheet originally created for the bonus payment and  it requests days rented info. Should I delete the bonus payment worksheet since the bonus payment is no longer reported on Schedule E?

The schedule E worksheet for the royalty payments seems to be fine.

[JohnB5677 · Accepted solution]

Yes, you should have only two Schedule Es'.  One exclusively for rent and a second one exclusively for royalties.  There should not be any other Schedule Es', and yes delete any additional.

[tshuter]

After implementing your suggestion I now have one Schedule E that includes royalty income. The signing bonus income which was listed as rent on a separate 1099 from the royalty income was moved to Other Income.

Deleting the Schedule E worksheet for the bonus payment cleared all the errors and makes logical sense since the bonus payment was not actually rent.

Thanks very much for all of your advice.