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14222: 6251 - Line 2t Intangible Drilling Costs


1040 Individual Data Entry

I have entered Intangible Drilling Costs on a K-1 using code JD. Only a portion of the total amount is carrying to the 6251, line 2t. Why is the full Intangible Drilling Cost not showing on line 2t? 
 

Intangible Drilling Costs can either be:

  • deducted in full as a current business expense, or
  • amortized over a 60 month period.

Per the 6251 instructions, if the deduction is being claimed in full, then the difference between the amount that would have been deducted through amortization and the full amount must be taken as an AMT adjustment on form 6251, line 2t (line 26 in Drake17 and prior): "Step 2. Subtract from the amount determined in step 1 the amount that would have been allowed had you amortized these IDCs..."

For the following example, Intangible Drilling Costs (IDCs) were entered in the amount of $5000. If the costs were to be amortized over a 5 year period, 20% of the total cost would be allowed as a deduction each year. For AMT purposes, the amount that could have been amortized this year, $1000, must be subtracted from the total amount of IDCs being deducted, $5000. 20% of $5000 is $1000, so the amount carrying to line 2t would be $4000. This amount is only used for Alternative Minimum Tax purposes. 

​Note: If you are choosing to deduct the full amount of IDC this year, but need to make adjustments to line 2t of form 6251, an override field is available on the 6251 screen. 

If the IDC deduction should be amortized over a five year period instead of being taken in full, the entry should be removed from the K1 data entry screen and entered on the 4562 screen. Use the FOR and Multi-Form Code boxes to associate the 4562 with the K1P or K1S screen to which it belongs. 

See "1040 K1P Box 13 Code JD" and "1040 K1S Box 12 Code JD" in Related Links below for more information. 


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