Under section 7704 of the Internal Revenue Code (I.R.C.), in order for a PTP to be taxed as a partnership (i.e., not taxed as an entity), 90 percent of its income must be “qualifying income” every year (after December 31, 1987) that it is a publicly traded partnership.

“Qualifying income”under the statute means the following:

• Interest;
• Dividends;
• “Real property” (i.e., real estate) rents;
• Gain from the sale or other disposition of real estate;
• Income and gains from the exploration, development, mining, or production, processing, refining, transportation, or marketing of any mineral or natural resource, industrial source carbon dioxide, or the transportation or storage of specified renewable fuels;
• Any gain from selling or disposing of a capital asset held for the production of any of the types of income in numbers i-v;
• Income and gains from commodities, if buying and selling commodities is the PTP’s principal activity.
• Any income that would be qualifying income for a regulated investment company (RIC) or a real estate investment trust (REIT).

Fxtensive IRS regulations adopted on January 19,2017 provide detailed guidance on the activities related to natural resources that will and will not generate qualifying income.

IRS regulations released in 1998 provide additional rules for treating specific types of investment income as qualifying income.