K-1 IDC (Intangible Drilling Costs) should be Active Income, not Passive

[phedwards2]

I am a General Partner with material participation in an oil & gas LP with IDC (Intangible Drilling Costs) losses.  I entered this info in the K-1 section in TT, but TT does not ask if I materially participate.  It classifies the IDC loss as a Passive Income loss.  I believe this is incorrect and it should an Active Income loss - and therefore should reduce this years tax due on other Active Income (such as W2 income).  Any idea how to make this IDC loss Active Income?  It's reported on the K-1 in Box 14 as a Self-Employment loss, so I think it should appear as such in TT.

[Critter-3]

Make sure you choose the correct K-1 form and entered in the correct info and the return will be filled in properly ...

[phedwards2]

Thanks for your reply.  Yes that's exactly how I filled it in.  The Box 14 Self Employment is a large loss, so I entered a negative number.  I think it should reduce my AGI, but it doesn't.

[Faraj]

I’m in the same boat. Is there any update on this one? 

[phedwards2]

Well I understand it now.  In my case, the K-1 Box 1 was blank, but I had to select it anyway in TT and then just leave it blank - then  you can say No to materially participate and TT then asks if it's an O&G company, to which you reply Yes.  That makes it NonPassive income/Loss.  You then enter the IDC loss when prompted and any other expenses/losses.  Those losses reduce your ordinary taxable income.

[Faraj]

Thank you for this update! Could you please also confirm that you still qualify for this NonPassive income/Loss whether you are a general partner or limited partner in the K1, correct? 

[phedwards2]

No, only General Partner.   Limited Partner is Passive, even for O&G companies.

[dyu626]

Thank you! That is a huge help! Now I just need to find a reputable oil and gas investment to fund as a GP within the next few weeks! Let me know if you have any recommendations/referrals!

Currently, I only know of King Operating in Dallas Texas that I just found from their youtube webinars that I thought was nicely done. 

[Oilinvestments]

Reach out to Prudent Resources LLC

[GE2024]

You can contact my advisor.  Their firm offers a few really great oil and gas drilling fund, reputable, good solid ones, not the ones u cannot even find info online.  [email address removed].