Schedule K-1 (Form 1065) - Alternative Minimum Tax Oil, Gas, and Geothermal

In the TaxAct® program, there is not an entry point for Schedule K-1 (Form 1065) Partner’s Share of Income, Deductions, Credits, etc. , Box 17, Codes D & E. Instead, you will use the information from these boxes to calculate the amount to enter on Form 6251 Alternative Minimum Tax—Individuals, Line 2t.

Per the Partner's Instructions for Schedule K-1 (Form 1065), on page 15:

Codes D and E. Oil, gas, & geothermal properties—gross income and deductions. The amounts reported on these lines include only the gross income (code D) from, and deductions (code E) allocable to, oil, gas, and geothermal properties included in box 1 of Schedule K-1. The partnership should have attached a statement that shows any income from or deductions allocable to such properties that are included in boxes 2 through 13, 18, and 20 of Schedule K-1. Use the amounts reported and the amounts on the attached statement to help you figure the net amount to enter on Form 6251, Line 2t.

To access the field for Form 6251, Line 2t in the Federal Q&A:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Taxes in the Federal Quick Q&A Topics menu to expand, then click Alternative minimum tax.
  3. Continue with the interview process to enter all of the appropriate information.
  4. On the screen titled AMT - Adjustments/Preferences - 2, enter the Intangible drilling costs preference amount to complete Line 2t of Form 6251, then click Continue.

Using the information from the Schedule K-1 and the instructions for Form 6251, Line 2t below, calculate the amount to enter. You may also view these instructions from within the TaxAct program by clicking your cursor in this field, then clicking Form Instructions on the right side under the Answer Center heading.

Per IRS Instructions for Form 6251, on page 7:

Line 2t—Intangible Drilling Costs (IDCs)

CAUTION! Don’t make this adjustment for costs for which you elected the optional 60-month write-off for the regular tax.

IDCs from oil, gas, and geothermal wells are a preference to the extent that the excess IDCs are more than 65% of the net income from the wells. Figure the preference for all oil and gas properties separately from the preference for all geothermal properties.

Excess IDCs. Figure excess IDCs as follows.

Step 1. Determine the amount of your IDCs allowed for the regular tax under section 263(c), but don’t include any section 263(c) deduction for nonproductive wells.

Step 2. Subtract from the amount determined in Step 1 the amount that would have been allowed had you amortized these IDCs over a 120-month period starting with the month the well was placed in production. If you prefer not to use the 120-month period, you can elect to use any method that is permissible in determining cost depletion.

Net income. Determine net income by reducing the gross income that you received or accrued during the tax year from all oil, gas, and geothermal wells by the deductions allocable to those wells (reduced by the excess IDCs). When refiguring net income, use only income and deductions allowed for the AMT.

Exception. The preference for IDCs from oil and gas wells doesn’t apply to taxpayers who are independent producers (that is, not integrated oil companies as defined in section 291(b) (4)). However, this benefit may be limited. First, figure the IDC preference as if this exception didn’t apply. Then, for purposes of this exception, complete Form 6251 through line 3, including the IDC preference and treating line 2f as if it were zero, and combine lines 1 through 3. If the amount of the IDC preference exceeds 40% of the total of lines 1 through 3 (figured as described in the preceding sentence), enter the excess on line 2t (your benefit from this exception is limited). Otherwise, don’t enter an amount on line 2t (your benefit from this exception isn’t limited).

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