Q: how do I determine what I will have to pay in taxes on the sale of my mineral rights?
I inherited them in 2009. Received monthly royalties. Want to sell now. What will I be taxed? Capital gains along with the value at the time of inheritance vs today's value? Or do I just owe my tax bracket on capital gains?
A:
You will need to contact a tax professional directly for a full evaluation. These are the general rules:
(1) Basis (value). You should have "carry-over" basis. Meaning that the mineral rights are valued at time of inheritance (which is really the value of the rights for the deceased person's land/rights). Note, depletion can change the basis amount.
(2) Taxed. Mineral rights are subject to taxation whether the are sold separately or with the land.
(3) Tax treatment. Mineral rights are usually classified as capital in nature. If you received your rents/royalties as capital gains it is very likely the sale will also be capital gains.
(4) Additional Considerations. The following things can impact the value and resulting profit of the sale: (a) depletion adjustments; (b) inclusion of access rights and/or fee simple sale on land; (c) recapture of depletion can apply if non-standard depletion was claimed on prior returns; (d) potential non-capital inclusions in the sale (e.g. equipment); and (e) other considerations.
Again, it is recommended that you contact a lawyer to review the sale and/or assess the likely tax results.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
