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KPMG report: Mineral interest income, eligible for section 199A deduction?

Mineral interest income, section 199A deduction?

Tax reform added a new section 199A that creates a potential deduction of 20% of qualified business income from partnerships, S corporations, and sole proprietorships. Availability of the deduction is predicated on the trade or business and income being “qualified,” but in many situations application of the new law is unclear.

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Taxpayers have questioned whether income from mineral interests, such as royalties and working interests, is classified as qualified business income for purposes of the new section 199A deduction. Based on a review of the relevant authorities, this KPMG report explains why mineral royalties held for investment are not likely to qualify for the 20% deduction and why working interest income may be eligible for the deduction.

 

Read a June 2018 report [PDF 85 KB] prepared by KPMG LLP: What’s News in Tax: Is Mineral Interest Income Eligible for the Section 199A Deduction? It Depends

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