depletion

[imjulier]

Help! I have a client with a partnership K-1 for oil & gas....yuck. Box 20T provides a statement with depletion information. It says total percentage depletion is $3,515 (subject to 65% taxable income limitation). What is this 65% limit? Also, statement says that all of the depletion is in excess of basis. Does this make the depletion not allowable so no entry on the tax return? If allowed, how do I enter this in ATX? I'm thinking about using a seperate line on Sch E, pg. 2. Any help is greatly appreciated.

Thanks,

Julie

[taxxcpa]

Help! I have a client with a partnership K-1 for oil & gas....yuck. Box 20T provides a statement with depletion information. It says total percentage depletion is $3,515 (subject to 65% taxable income limitation). What is this 65% limit? Also, statement says that all of the depletion is in excess of basis. Does this make the depletion not allowable so no entry on the tax return? If allowed, how do I enter this in ATX? I'm thinking about using a seperate line on Sch E, pg. 2. Any help is greatly appreciated.

Thanks,

Julie

I don't know about ATX, but what they probably mean is that the $3515 is 15% of gross income, but if the taxable income is less than $ 3515 you can take no more than the client's taxable income; i.e. you cannot create a NOL with depletion.

[Joel]

See attachment.

Assuming the income on line 1 of the k-1 is sufficient, I make a new k-1 entry with the name of the partnership and "depletion" and enter it as a loss on line 1.

Depletiion Allowance.pdf

[Joel]

Sorry about the lopsided attachment.

[taxxcpa]

Sorry about the lopsided attachment.

Although I did not use ATX, I ended up with the royalty from a partnership shown on Schedule E and the depletion shown on the line for depreciation and depletion. I think I just entered the K-1 info and the figures flowed to the proper forms. The partnership was a law firm that only had a small amount of royalty

[imjulier]

Thanks Joel and taxxcpa-

Good information...I think I'll be following Joel's method since I'm not sure the k-1 represents roylaties (its an operating company) and its consistent with my first thought of putting it on pg 2 of E with a seperate entry. Thanks again for your input.

Julie