IDC deduction for a trust as a general partner

I am interested in becoming an investor general partner in a drilling partnership using my revocable trust as the partner. I want to be a general partner to be able to take a tax deduction in the first year for a portion of the intangible drilling costs. Does anyone know if a trust can be a general partner and still be able to take the deduction or must the general partner be an individual person?

Best to talk to an attorney and an accountant to those sorts of answers.

Why would you want to be a general partner and take on personal liability? Consult with your attorney in the state where the wells are located about the best approach for the GP. Perhaps you can be member of an LLC as the general partner with a very small interest. An attorney and tax CPA can tell you how or if that would work under state and federal laws.

The reason to be a GP is to take advantage of the deduction from ordinary income of intangible drilling costs rather than only against passive income if an LP.

In many cases, a trust can serve as a general partner in a partnership and still be eligible for certain deductions. However, tax laws and regulations can vary based on the specific circumstances, the type of partnership, and the nature of the deductions being considered.

The ability of a trust to take deductions as a general partner can depend on various factors, including the terms of the trust, the partnership agreement, and tax laws in the relevant jurisdiction.

It’s advisable to consult with a tax professional or an attorney who specializes in tax law to get accurate and specific guidance.

You should consult with an attorney who is also a CPA and who is experienced with oil and gas. Such unicorns exist but I cannot tell you how to find one easily.

This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship.

Thank you everyone for the input. I think that I will pursue the investment as a limited partner and use the passive IDC’s against passive royalty income. Now I will need to find more royalty income. I will avoid the GP unlimited liability.

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