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How to make oil and gas royalties show up as passive income?

Forum|Forum|3 years ago
June 29, 2023
2 replies
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I am working on a trust return (1041), and I entered oil and gas royalties from a 1099 on schedule E. I chose property type 6 in box 1b and included the royalty income on line 4, yet Proseries Professional is showing it as nonpassive income and including it on line 5 of the K1 when it should be line 6. Any ideas how to get Proseries to report it as passive income?

ProSeries Professional

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Best answer by sjrcpa

There is no participation in the income generation. The trust receives periodic checks from oil & gas companies for royalties.

Look at IRC Section 469(e)(1)(A)(i)

Level 9

Did you look to make sure you didn't check off a box on schedule E that says active participation?

SuzB92Author

Level 3

The material participation and active participation checkboxes are all blank.

Intuit Community Champion

Intuit Community Champion

Wouldn't you want it on the K-1 Line 5 as Portfolio and Non Business income rather than Line 6 as Ordinary Business Income?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

Level 15

What makes you think it should be passive?

The more I know the more I don’t know.

SuzB92Author

Level 3

There is no participation in the income generation. The trust receives periodic checks from oil & gas companies for royalties.