Hi! Hoping someone can help. I am a general partner in an Oil and Gas venture, receiving K-1s.
I'm looking at the instructions for Partners' K-1 Form 1065 and the woksheet is different for 2023 than for previous years.
This year, I started out with an adjusted (outside) basis of 0$.
I increased it by $532 dollars (box 1 ordinary income). I have $410 dollars in Box 13 code J (IDC's) and $757 in box 20 code T (Depletion) which I treat as percentage depletion. I do not amortize.
So, if I report -$410 as IDCs loss, the intermediate basis is now $122. I then report the full -$757 as Percentage depletion, reducing my basis to $0 (basis cannot go negative). This gives me a total reduction of $1167 on Schedule E, and a new adjusted basis of $0.
However, if I subtract the Depletion deduction first, I end up with an intermediate $0 adjusted basis, and cannot report the IDC of $410 as a loss, but rather must carryforward.
Which is the correct approach? I.e., what is the proper order to account for these deductions?
Thanks in advance..
