How do you get Turbo Tax Deluxe to generate Sch E?

[lwilki3417]

I received a 1099-MISC for executing a prepaid gas, oil and mineral lease. There is currently no active well and they have three years to extract the minerals, if ever, for which we will start receiving royalty payments. The 1099-MISC lists it as rent income but from what I am reading from other questions asked and answered, it seems it needs to be entered as royalty income. How do you do that when the 1099-MISC lists it under rents? The error I get tells me it can't be both - rental and royalty. It says I don't have net profit that needs reporting and won't produce a Schedule E. Property taxes paid in 2016 have been reported on Schedule A since it is the primary residence. I don't know how to proceed. Help! Thanks."

[Cattlerancher]

The desk top CD/download version of Deluxe does support schedule E. Only the online version does not.

[MiriamF · Accepted solution]

Your interpretation appears to be correct that the income should be reported under Royalties (Box 2), but you are stuck with this 1099-MISC.

The only other interpretation that makes sense is that Box 1 is also used for surface activities, such as renting pasture land. While the drilling company is certainly using the surface, their activities go far deeper than that.

You can either file this 1099-MISC as printed, or you can request that the drilling company produce a corrected form. However, making this change (from Rents to Royalties) will not affect the amount of tax you will have to pay. Both will count as ordinary income and will be taxed at your marginal tax rate, and both will allow you to deduct expenses, such as property tax.

If you want to question the way this income is reported for next year, go ahead. For this year, the easiest path is just to list this income as rental income.

TurboTax Deluxe is not capable of handling rental or royalty income. You will need to unlock the Premier version. When you enter the 1099-MISC, TurboTax will prompt you to upgrade to Premier. It will cost you a bit extra, but you will have access to what you need.