Re: Oil & Gas K-1s
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Level 1

Oil & Gas K-1s

The supplemental information for a K-1 Line 20T shows 4 depletion amounts and net equivalent barrels: working interest  % of depletion, working interest cost depletion, royalty interest % depletion, royalty interest cost depletion, net equivalent barrels. 

 

Where do I enter these different amounts?

 

In answering TT questions, do I select using % of depletion or cost depletion?

3 Replies
Level 15

Oil & Gas K-1s

Code T. Depletion information—oil and
gas. This is your share of gross income
from the property, share of production for the
tax year, and other information needed to
figure your depletion deduction for oil and
gas wells. The partnership should also
allocate to you a share of the adjusted basis
of each partnership oil or gas property. See
Pub. 535 for details on how to figure your
depletion deduction

 

from PUB 535

Partnerships and S Corporations
Generally, each partner or S corporation shareholder, and not the partnership or S corporation, figures the depletion allowance separately.
Each partner or shareholder must decide
whether to use cost or percentage depletion. If
a partner or shareholder uses percentage depletion, he or she must apply the 65%-of-taxable-income limit using his or her taxable income
from all sources.
Partner's or shareholder's adjusted basis.
The partnership or S corporation must allocate
to each partner or shareholder his or her share
of the adjusted basis of each oil or gas property
held by the partnership or S corporation. The
partnership or S corporation makes the allocation as of the date it acquires the oil or gas
property.
Each partner's share of the adjusted basis of
the oil or gas property is generally figured according to that partner's interest in partnership
capital. However, in some cases, it is figured
according to the partner's interest in partnership
income.
The partnership or S corporation adjusts the
partner's or shareholder's share of the adjusted
basis of the oil and gas property for any capital
expenditures made for the property and for any
change in partnership or S corporation interests.
Recordkeeping. Each partner or
shareholder must separately keep records of his or her share of the adjusted basis in each oil and gas property of the
partnership or S corporation. The partner or
shareholder must reduce his or her adjusted
basis by the depletion allowed or allowable on
the property each year. The partner or shareholder must use that reduced adjusted basis to
figure cost depletion, or his or her gain or loss, if
the partnership or S corporation disposes of the
property.
Reporting the deduction. Information that
you, as a partner or shareholder, use to figure
your depletion deduction on oil and gas properties is reported by the partnership or S corporation on Schedule K-1 (Form 1065) or on Schedule K-1 (Form 1120-S). Deduct oil and gas
depletion for your partnership or S corporation
interest on Schedule E (Form 1040 or
1040-SR). The depletion deducted on Schedule E is included in figuring income or loss from
rental real estate or royalty properties. The Instructions for Schedule E (Form 1040 or
1040-SR) explain where to report this income or
loss and whether you need to file either of the
following forms.

 

 

to make like simple don't bother entering the 20T info in the k-1. TT does not use it. Royalty income (line7 of K-1) flows to Schedule E page 1 where the royalty depletion is reported.   working interest is probably reported on line1 of k-1 and the depletion would need to reported separately. TT has no good way of handling this so what I would do is if line 1 of k-1 represents working interest I would reduce line 1.   

 

 

 

 

royalty income is portfolio type income and hence is not subject to the passive activity rules.  on the other hand, if you are a limited partner then the working interest income and expenses are subject to the passive activity loss rules. 

 

 

here are some facts about % depletion

generally, the rate is 15% for oil and gas properties applied to gross receipts.  they do not include lease bonuses, advance royalties or other amounts paid without regard to production from the property. royalty owners qualify by working interest owners who are not retailers or refiners only qualify if production is <1000 barrels a day. % depletion is limited to the net income from each property  b/4 depletion.  % depletion can't exceed 65% of taxable income with certain adjustments.  cost depletion is limited to basis % depletion is not. 

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Level 15

Oil & Gas K-1s

 
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Expert Alumni

Oil & Gas K-1s

The working interest depletion gets entered when you enter your box 20 code T information.  The royalty interest depletion is automatically entered on a Schedule E that gets created when you enter the K-1 with royalty income.  You'll need to find that Schedule E in the Rental Properties and Royalties section, and edit it to answer that the royalty is an oil and gas royalty.  At that point, TurboTax will automatically enter 15% depletion for the royalty income, but you change the amount for depletion in that "box".  Click the "Learn more" link on that page where depletion is entered if you want more information.

 

For the working interest amounts reported on your Form 1065 Schedule K-1 for box 20 code T, the choice you will need to make is whether you want to use either cost or percentage depletion for all 4 properties, or instead choose cost depletion for some of the properties, and percentage depletion for the others.

 

If you are using either cost or percentage depletion for all of the properties, you can add the amounts for the 4 properties together, and enter as if if was one property. 

 

If you want to make that "cost or percentage" decision on a property by property basis, you will at a minimum need one additional separate K-1 for that same partnership, so that one K-1 reports only the box amounts for properties for which you are choosing cost depletion, and the separate K-1 reports the box amounts for the properties for which you are using percentage depletion.

 

Once you enter your code T and amount on the "box 20" screen, you'll make the choice between cost and percentage depletion on a subsequent screen in the TurboTax K-1 entry questions.

 

Here are the instructions given in TurboTax for box 20, code T:

 

"Using the information supplied with the K-1, enter the cost depletion amount, if provided, on the K-1 Additional Information worksheet Box 20, Other Information section for Code T, line 1. On lines 2a and 2b of that worksheet, enter the gross income from oil and gas and calculate and enter the percentage depletion amount based on the information supplied. The program will deduct the greater of the cost or percentage depletion amounts."

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