Dinosaur royalties

[Teri241]

I have a K-1 with Royalties from dinosaur bones extracted from our land.  In order to enter the 15% depletion, so I check the box in Turbo Tax that the Royalties are from Oil and Gas or do I enter the depletion separately on Sch E?

[PatriciaV]

Checking the box for "oil and gas" will report 15% of your royalty income as percentage depletion. Depending on the purpose of the extraction, the depletion rate may be different, in a range from 7% to 22% (see 26 U.S. Code § 613 - Percentage depletion for a complete list). 

If you choose to use a different percentage, you can enter this as a miscellaneous expense for the royalty property instead of choosing the default 15%.

[TB41993]

What if depletion isn't reported in box 20 with code T on my 1065 K-1?  Should I still enter it myself on the K-1 form with Code T and calculate the depletion?

[PatriciaV]

No. If the royalty income was reported on Schedule K-1 Box 17 Code D, depletion should be calculated and reported in Box 20 Code T. You might check with the company that sent you the K-1 to confirm that Box 20 Code T should be blank.

However, if the Royalties were reported on Schedule K-1 Box 4, TurboTax should have created a Schedule E for this income. In this case, be sure to review that Schedule E (under Rental Properties & Royalties) to indicate the royalties were from mineral interests. The program will ask you about depletion during that interview, which is where you can enter the amount you have calculated.