Passive or Nonpassive Income

A quick question about our FLP.We get our partnership income from Oil and Gas Royalties…So are our Partnership’s trade or Bussiness activities considered Passive orNonpassive for us. I’m thinking Nonpassive cause it’s Oil and Gas Royalty but not sure.Can you please tell me this?

But yet this is from a K1 with income from Oil and Gas Royalities. I had a CPA tell me this: Passive activity gross income does not include portfolio income.Portfolio income includes gross income attributable to royalties. So now I’m really not sure how to go with this

Joel said:


If you are not actively participating in the management of the company it is passive income. The income goes on Sched E.

I have always understood from a tax standpoint that if you have executive rights to the mineral interest you own, giving you the authority to convey or lease your rights to others, income derived by these activities is considered active, non-passive income. You have control over the management of your interest. Does the General Partner have the executive rights to the properties through the Partnership? Are you a limited partner or general? Good question. I'm curious how this is handled as well.

I saw a friend transfere his mineral interest to a business he owned before he collected the bonus money. What are the advantages?

If it is passive income where would you make deductions for atty fee to check lease, trips to courthouse to determine ownership, etc?