To determine your tax basis on the sale of mineral rights, check out InflationData.com and look up the inflation adjusted price of oil in 2003 and 2018. This would be $38.06 in 2003 and $57.77 in 2018. In the example above, on a $100,000 sale we would show the basis as $65,881.96.
What are oil wells worth?
Onshore wells can be considerably cheaper, particularly if the field is at a shallow depth, where costs range from less than $4.9 million to $8.3 million, and the average completion costing $2.9 million to $5.6 million per well.
Are mineral rights a capital asset?
Mineral rights are considered capital assets for tax purposes. If you sell mineral rights, for tax purposes, this is treated as a long term capital gain, as long as the land has been owned for more than one year.
What is the cost basis for inherited mineral rights?
Another term used for the cost basis for inherited mineral rights is “fair value.” It is essentially the book value of what you inherit on the day you inherit it.
When to ask questions about inherited mineral rights?
Often, the arrival in the mail of an oil and gas lease proposal is the first time people even become aware of inherited mineral rights, and thus have reason to educate themselves about the matter. Generally seen as a welcome inquiry, a lease proposal prompts a number of questions. Is this a fair deal? Do other family members know about this?
Why are mineral rights worth what they are?
In the most basic sense, mineral rights are worth what a buyer is willing to pay for them…at this moment. For starters, mineral rights are a unique asset. If you’ve inherited mineral rights, there are no costs of ownership. Additionally, there aren’t any liability risks.
How are mineral rights separated from surface estate?
It depends simply on whether in the past the mineral estate (the mineral rights) have ever been severed (separated, removed) from the surface estate. There is a determinable answer to this question, although at times it can be complex and take considerable time and effort to confirm.
