Tentative Depletion on form k1 (partnership)

Forum|Forum|5 years ago
September 12, 2020
1 reply
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Client is limited partner in oil and gas partnership. Form k1 shows both cost and percentage depletion. I understand that it is up to individual taxpayer to deduct - this is not deducted on partnership level. I am unfamiliar with how partnerships report this though. Do I enter BOTH figures on screen 20 in Lacerte or the larger of the two? Originally I thought I should enter both and Lacerte would run calculations to figure the best deduction - but it looks like Lacerte deducts BOTH if I enter both figures.

Also in regards to sec 59(e)(2) expenditures - client wishes to amortize rather than deduct - however no dates are provided for the "start date". Is this something usually provided by the partnership? Or is a "various" date allowed?

Thank you in advance!

Lacerte Tax

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PhoebeRoberts

Intuit Community Champion

Every partnership reports it differently. I've seen some funds-of-funds with 5 or 10 lines of variously-named depletion, plus the adjustment for percentage depletion in excess of basis. I take my best guess and make whatever Lacerte entries give me the desired result. Don't forget to make an entry for AMT depletion (same as regular tax unless indicated otherwise).

I've never seen a partnership report a date placed in service for IDC, in part because the whole point of an O&G partnership is to be able to write off all of your IDCs. The truth is likely to be various dates; you can either use the leading minus sign to indicate various, or 6/30/2019.

V

vivlewcpaAuthor

Level 2

Thanks Phoebe! I was hoping you'd be the one to answer. 🙂 I'd seen your answers on so many posts and you're always so helpful.

My understanding (which I admit is quite limited to these O&G partnerships) is that if they take the IDCs all at once, my client is required to make AMT adjustments - which resulted in him paying some AMT tax. In addition, because he is a limited partner and subject to passive loss limitations anyways - he doesn't need the huge write offs...

And not part of my original question - but Lacerte is doing this odd thing on the Federal K1 reconciliation worksheet where they are changing my "ordinary income" k1 input by a figure equal to what they are sticking in the "disallowed due to at-risk" column. I've filled out the "at-risk" boxes in the k1 section (he has enough "at-risk" basis) - any idea why Lacerte is doing this and how to fix it?

PhoebeRoberts

Intuit Community Champion

Yes, if you take all your IDCs at once, and you have sufficient excess IDCs, you do have an AMT adjustment. And I agree, limited partners don't qualify for the working interest exception. It's unusual to see an O&G partnership that starts you off as a limited partner; I'm guessing the "you get a big tax deduction in exchange for your cash" selling point isn't the selling point these days.

If he has both basis and at-risk, there shouldn't be any disallowed amount. Lacerte is generating a basis schedule (either as a statement or a worksheet), and it shows sufficient basis? The 6198 has a positive amount on Line 20?

The last time I had a weird basis limitation I wasn't expecting, I had a deduction entered as a negative amount, rather than a positive, and it made Lacerte unhappy in really strange ways.

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