Certain interests held in oil or gas properties are excluded from the term "passive activity". This exception applies regardless of the taxpayer's level of participation. In effect, for this type of activity, Congress has replaced material participation with unlimited liability.
This code section just simply provides that working interests in oil or gas properties are not passive activities. It is still necessary to determine whether such income is "active" or "portfolio" income. If the TP materially participates in the activity, it is active. If not, the determination becomes rather complicated.
This code section just simply provides that working interests in oil or gas properties are not passive activities. It is still necessary to determine whether such income is "active" or "portfolio" income. If the TP materially participates in the activity, it is active. If not, the determination becomes rather complicated.