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dolphin_dreams
Level 1

1099 Misc Schedule E

We received a 1099 for mineral rights and it is reported in box 1 as rent.  At the review page, , I got this error, Income from rental real estate and royalties must be reported as separate properties.  I idon't thave different properties. We received a 1099 misc but it was for an oil rights on a property. The company marked it in the rent box instead of royalties. Can I not deduct it as royalties?  Do I just need to say rent and take the tax hit?

3 Replies
mesquitebean
Level 15

1099 Misc Schedule E

@ dolphin_dreams 

I'm a fellow user, not a tax expert, but I can tell you how that section works and how it fills out the Schedule E.

 

The Box the income should be in depends if it was a lease bonus payment or royalties.  Or did the company incorrectly report your royalties as a lease payment instead of royalty?   I've seen them make such a mistake before, or the other way around.  There's a difference between a lease bonus payment and royalties.  See the below:

 

If it's a lease bonus payment, the 1099-MISC should show the payment in Box 1 as "rents."  i.e., they leased/rented your mineral rights in the land.

 

If it's actual royalties based on production (such as oil and gas royalties), the 1099-MISC should have an amount in Box 2.

 

Did you get both a lease bonus payment AND also royalty payments for production?

 

If so, on the finished Schedule E, there should be one column for the rent (lease bonus) payment, and a separate column showing the royalty payments.

 

To get the two kinds of payments into separate columns, when you go through the interview you may have to name them differently, such as "[My property]-lease" and "[My property]-royalty".

dolphin_dreams
Level 1

1099 Misc Schedule E

Thank you so much. This was very helpful. They are only leasing or renting for the mineral rights right now so then box 1 would be the correct box if I understand you correctly. You only fill in the royalties box when oil has been found and you actually received something from the lease.  

mesquitebean
Level 15

1099 Misc Schedule E


@ dolphin_dreams wrote:

Thank you so much. This was very helpful. They are only leasing or renting for the mineral rights right now so then box 1 would be the correct box if I understand you correctly. You only fill in the royalties box when oil has been found and you actually received something from the lease.  


Yes, a mineral lease payment is "rent," and on the 1099-MISC the company provided, they should have shown the amount in Box 1. 

Later on, when they start paying royalties for production, a future 1099-MISC should have an amount in Box 2 for royalties.

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