How should I enter a 1099-misc that I received for a mineral right lease?

[JoannaB2]

It depends. The 1099-MISC income is entered on either Forms Schedule E, F,C, or as Other Income. You may contact the payer if the income was a lease payment (rent) or minerals (royalties).  If it's a lease, it's entered on Box 1 as rent income, and box 2 for royalties.  You may follow the steps below to enter the income:

1. Login to Turbo Tax
2. On the left side of the screen, click Tax Tools, then Tools.
3. Select Topic Search and type on the search box Form 1099-Misc, click go..
4. Enter your mineral rights lease  income on the proper box. 

[AmatureTT]

I know I am entering this on the 1099 Misc Form but is this non business or business income? 

[Carl]

is this non business or business income?

Neither. It's passive income. For rental income and royalty income, it gets reported on SCH E as a part of your personal 1040 tax return. You start in the Rental & Royalty Income (SCH E) section of the program. With the online version of Deluxe, that's under the Personal Income tab.

[The Big Daddy]

When I try to enter rent from misc 1099 the Turbo Tax does not like it because its a rent not a royalty. Try to put it in as rent and it thinks its a rental property. It doesn't seem to allow for a signing bonus or rent from mineral rights contract signing rent only.

[PattiF]

Lease bonus payments are considered rental income. See IRS Tips on Reporting Natural Resource Income . 

• Enter your 1099-MISC for rents in the 1099-MISC section as it appears.
• Check that it is for Rental income from the rental of real estate (Schedule E)
• Add Lease Bonus on the screen to select the rental or royalty that generated this income, and check that.
• Continue through the rest of the section.

@The Big Daddy 

[The Big Daddy]

 It says what type of rental is this do I answer other and put "Lease Bonus" as Describe other type?

What about the blanks for description city state and zip? It doesn't like those blank. Do I calculate days entered by looking at the contract? You would think the program would make it as easy to use as if it was a royalty from the mineral lease.

[RobertB4444]

Yes, 'lease bonus' is the description.

City state and zip should be of the actual property that is being leased.

@The Big Daddy 

[The Big Daddy]

It doesn't have an address, I guess a parcel number for address then count for city I get off of the contract. Zip code is going to be a toughly. I didn't know I even owned it until the "Land Man" came looking for the kin of my Great Great Grandfather to sign contracts to drill it.

I guess the days rented is days remaining in year from the day I signed the contract. I acquired it the day my dad died? Neither my dad or his mother even knew they owned it.

[PattiF]

A parcel number would be good for the address. Use the information that you can find for the address. 

Yes, you can count the days from the contracting signing to enter into the form.

That's quite a story! Pleasant surprise from your Great Great Grandfather. Sorry for the loss of your dad.

@The Big Daddy 

[The Big Daddy]

My dad passed away 15 years ago and just found out about this earlier this year. I was thinking they wanted the date I acquired it so that would the day he passed away I guess even though I had no clue.

[PattiF]

Yes, that would be the date to use for when you acquired this asset that you didn't know of before. This was a Long term forgotten family asset!

[The Big Daddy]

What about fair market value including land and available date?  at this point I feel like I would be just making things up is this right. Then Land Value do I just leave all this blank?

[RobertB4444]

Fair market value is whatever is on the tax rolls since you haven't had it appraised.  Land value is the actual value from 15 years ago but I would just enter the same number as fair market value for now.

@The Big Daddy 

[Carl]

Fair market value is whatever is on the tax rolls since you haven't had it appraised.

That needs clarification. There is a vast difference between tax value and fair market value. While all tax rolls will show the tax value, they don't all show the fair market value. Typically based on what I've seen, the tax value is about 30% lower than the fair market value.

In my county, they just recently started showing FMV on the tax bills a few years after the crash of 2008/9. Before, all you got/saw was the assessed tax value.

Now-a-days when converting a property from personal use to rental use, it is not that common for the value on the date of conversion to be lower than the original acquisition price/value. However, depending on the locale it's perfectly possible for the assessed tax value to be lower. That's why the IRS does not condone the use of tax values for depreciation. (I've not seen anything that forbids it. Best I've seen is where it gives me the impression it can be used only when all other methods of determining FMV have been exhausted.)