Mineral Rights Lease


J

Jim T.

My wife received a payment for a lease to some mineral rights that she
owned on a farm owned by her father and long since sold. Where do I
report this?
BTW, I find TurboTax not helpful.
 
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D

D. Stussy

Jim T. said:
My wife received a payment for a lease to some mineral rights that she
owned on a farm owned by her father and long since sold. Where do I
report this?
BTW, I find TurboTax not helpful.
Most likely, Schedule C (NOT Schedules E or F, but maybe Form 4835). The
reason is the depletion deduction.

However, are you certain that it's her income? It might be in error and
belong to the current owner of the property.
 
E

ed

Most likely, Schedule C (NOT Schedules E or F, but maybe Form 4835).  The
reason is the depletion deduction.

However, are you certain that it's her income?  It might be in error and
belong to the current owner of the property.
Schedule E for Royalties and Rent. Since it's just a siingle item it
could go on 1040 line 22 but when Royalties start it;s E.
ed
 
D

dpb

On 3/24/2012 8:10 PM, D. Stussy wrote:
....
However, are you certain that it's her income? It might be in error and
belong to the current owner of the property.
Likely the ground was sold but retained mineral rights. _Very_ common
in areas where there is or is foreseen to be oil/gas production.

--
 
X

X

dpb said:
On 3/24/2012 8:10 PM, D. Stussy wrote:
...
However, are you certain that it's her income? It might be in error and
belong to the current owner of the property.


Likely the ground was sold but retained mineral rights. _Very_ common
in areas where there is or is foreseen to be oil/gas production.
~~~~~~~~~~~~~~~
It may be rent --or it may be royalty or working interest.
If it a payment based on production, put it on Sch C if it is a working
interest and put it on Schedule E if it is a royalty interest--take 15%
depletion in either cas.

If it is NOT based on a share of production, it is Rental Income and would
go on Schedule E as RENT and no depletion would be allowable.
 
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D

dpb

On 3/25/2012 12:09 PM, dpb wrote:
....
Likely the ground was sold but retained mineral rights. _Very_ common in
areas where there is or is foreseen to be oil/gas production.
....

I'd add that if this is new activity on an old lease or a new lease and
haven't paid much attention to what's going on in the area owing to the
ground having been sold some time ago it may pay to dig into it in some
depth. A few leases in some new areas around here have gone as high as
$3000/A on initial lease and there have been some sizable new
discoveries that are pulling in big royalties where a seemingly small
difference in the royalty rate if there is a producing well developed
can make very large difference in subsequent royalties. There is
potentially some serious bucks at stake...

--
 

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