Replies to This Discussion

Permalink Reply by Joe Aldridge on March 11, 2011 at 9:57

I might add: If your property is in production at the time of death then your estate will have to go to a Geologist/Petroleum Engineering firm and have a detailed appraisal done. That appraisal will be very expensive. And then on top of that your estate may have to pay tax on the appraised value of the minerals in place to both the Feds and the State of Louisiana before any property is transfered to your heirs. Again I'm not an attorney but this is the way it was explained to my family a number of years ago when my parents were in the process of transferring our property.

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Permalink Reply by P.G. on March 11, 2011 at 12:41

Okay, so lets say giving one child my land and the other one my mineral rights is causing a greater tax liability than I was planning for and so I decide to just give them an equal undivided interest in the land. Forget any mention of the mineral rights that naturally enjoyed by land owner anyway if not reserved by a previous owner. Say the land is worth an appraised (by licensed real estate appraiser) value $1000 an acre.

Will they become liable to the IRS for more than $1000 and acre?

As land owners they could do what they wished with the minerals if anything at all, right?

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Permalink Reply by Joe Aldridge on March 11, 2011 at 13:18

P.G. 

I agree with you. There is never two appraisals for land and minerals unless the minerals have been discovered and are producing. I'll see my attorney over the weekend and I'll run some of this by him. I'll get back to you. The thing about CHK that TAURUS talks about is between those two parties. If there is no offer then there is no value if there is no discovery. The mineral rights only value is if there is a bonafide offer to buy the rights before discovery. This is the way I and it seems you understand Louisiana Mineral Law. Again, I am not an attorney but that was the way this was explained to my family a number of years ago by an attorney. My Mother and Farther decided to transfer the land with the minerals and not separately. They did not get two appraisals. The minerals had no value separate from the land under Louisiana Law and if you do separate the mineral rights its only worth what someone will pay at the time of the offer provided there is no discovery. I would suggest that anyone wanting to do a transfer do their homework and talk to more than one professional about the route to go with a donation to family members.

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Permalink Reply by P.G. on March 12, 2011 at 14:58

No doubt there are professionals who are qualified to approximate an inventory of minerals under a given piece of land with the technology available to them and come up with a price of what they'd be worth but I'm glad Louisiana doesn't tie ownership of those minerals to the land owner until the landowner gets his/her hands on them. Can you imagine what one's property taxes would be if they did?

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Permalink Reply by Harryb on March 16, 2011 at 5:36

The really frustrating thing about all of this is that there appears to be no right or wrong answer.  Nobody can give a definitive answer one way or the other.  My mother passed away last year.  She had nonproducing mineral rights, both participating and non-participating, in Shelby County TX.  My CPA, here in NY, told me I needed to get an appraisal of the value of her mineral rights for her estate taxes.  Nothing would be owed, they are considered real property in TX and NY can not tax them, but I still needed a value in case it was ever sold down the road.  I called a very well-known appraisal company in TX and was told I could not get an appraisal done since it was non-producing.  They said the value of the mineral rights is what they are currently under lease for.   Equally frustrating is if that is the case, she signed a lease very early in the whole process before things came to light about the potential in the area so her lease amount is VERY low compared to those around her.    Do I provide a copy of the lease as substantiation of the value?   Does what the TX appraisal company said sound right to those of you with mineral rights in TX?

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Permalink Reply by Dan Arnold on March 16, 2011 at 10:43

Again, this goes back to the basic issue that the minerals may or may not be present, may or may not be available in sufficient volume to be capable of being produced at a profit in the current market. Future markets are completely speculative.

 Bottom line, unknown minerals, have an unknown value. They are only worth what someone will pay for them or what they are sold for.

My original suggestion, to execute a mineral deed for " ten dollars and other good and valuable consideration" or "the love and affection that we have for our daughter" , may seem a little more sensible now. The value (to you) of the minerals is established in the deed. This is the traditional and legal language that has been used since the very first mineral deeds were developed.

If there ever is any commercially viable production, then the sale of those minerals will be taxed. Until such time the value of the deeded minerals is non existant or negligible, lacking  a legitimate purchase offer.

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Permalink Reply by P.G. on March 17, 2011 at 2:53

Been nice if the uncle could have elaborated a bit on why everyone is wrong...

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Permalink Reply by TAURUS on March 17, 2011 at 2:54

Soccer Mom ...

 

Your uncle's statement that "no one who has written any thing here knows what they are talking about" is pretty broad. I tend to take exception to it. I'm guessing he didn't read every single post (mine). If he did, is he taking exception with the IRS and the Internal Revenue Code that I copied and pasted from the www.irs.gov? Or how about the list of "Qualified Appraisers" that I provided? I think if he took the time to look at it he'd find that some of them are "world class" and conduct business globally. It's possible they're even more capable than he is. I can't say for sure because I don't know your "uncle".

 

I agree that there are a lot of incorrect answers in this thread but I wouldn't go so far as to say "all". Pretty strong statement. I tend to avoid words like "always", "never", "all"....etc.

 

I'm also not saying that your uncle is incorrect about needing a "date of death appraisal" as it relates to Harryb's scenario and the valuation of his mother's estate, but I'd point out that it is a seperate topic from Mr. Stiles original topic for this thread of gifting his minerals to his children while he's "alive" and needing a "Qualified Appraisal" to do so. Certainly "he" would not need a "date of death appraisal" would he? Of course not.

Part of the problem here is that posters are sidetracking this thread with other issues and commenting on all of them. Obviously not all comments will apply to everything that has been asked here. It would be better to take some of these side questions and start a separate thread maybe in the "Death and Taxes" group on the Forum so they could be addressed specifically vs. taking this thread further off topic and creating confusion.

 

Respectfully .......

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Permalink Reply by Dan Arnold on March 18, 2011 at 6:21

Here is an example of the way I observed the original question.

Let's say my father died and in his will he left me his 1956 Chevrolet Nomad station wagon. The car is in excellent condition and as a "classic" car,  we can estimate it's value. He once told me that he had hidden some "valuable papers" in the car. We haven't found the "valuable papers" or identified what they might be, but i want to give them to my children. What are they worth?

They could be stock certificates, historic documents, or coupons for a free hamburger that expired three months after he got them. I need to satisfy the IRS on the value of this gift to my children, which appraiser do I hire?

I realize that is a bit silly. Minerals of every kind and character do have some probable value. If the land is in an area where it is likely there is potential for commercial oil or gas production, that is one thing. If the land is full of lignite that is another thing. If the "minerals" could be gold, silver, other precious metals or gemstones, that is another. What about gravel or sand, etc. The point is the appraiser will have to make those determinations based on information that we were not given.

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Permalink Reply by TAURUS on March 18, 2011 at 6:38

Dan,

 

If that's the way you observed the original question you should read it again. The original post is at the top of this page. The "original poster" is Mr. Stiles who is very much "alive" and wishing to gift his minerals to his family while he and his wife are alive. These mineral rights are likely "not" some wildcat interests as is indicated by the comment regarding them having brokered a lease deal in the recent past. Also the comment that perhaps they could "all enjoy a little slice of this together" (they and their children) indicates that there is something to divide up. That's likely more significant than coupons for a free hamburger. The "original poster" did not disclose how many acres are involved or the revenue that has come from these but the fact that he has taken the time and expense to pursue this with his CPA/CFP and search for a "Qualified Appraiser" gives the connotation that "they" at the very least put significant value on these minerals that "they" clearly have identified. It may be a mystery to you and the other posters here what these mineral rights include but only because the "original poster" did not share that info with you. The "original poster" is far from some clueless individual who doesn't know "anything" about what it is they have.

 

There are other clues in the "original poster's" posts. Nonetheless, I believe he has found what he was looking for.

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Permalink Reply by P.G. on March 18, 2011 at 8:56

What is the ownership status of un-recovered minerals under land in Louisiana?

A land owner only has the "right" to harvest..

So wouldn't the question be just what is the worth of the right to harvest..

Could a land owner sell or lease mineral rights to more than one person or company willing to try his luck at harvesting those minerals? What makes it exclusive?

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Permalink Reply by Harryb on March 17, 2011 at 6:23

Hi Soccer mom - I do understand that I need a "date of death appraisal."  That is what I have asked for.  I talked to Pritchard & Abbott, a leading company in valuation mineral rights.  I spoke to the woman who heads up the Shelby County area and she told me what I said before - they can not give me a date of death value because it is non-producing.  

Taurus - I understand this is slightly off topic from the originial thread since it is date of death, but the issue still remains - can you get a mineral rights appraisal on non-producing mineral rights.  Some here say yes and some say no.  Who do you believe?  When I started reading the thread I thought I would get some insight as to why I was told one thing and everyone else is saying another.   I have been running around in circles. 

If anyone knows of a company that I can contact, that will give me a date of death appraisal for approx. 276 acres of non-producing, participating mineral rights and 130 non-producing, non-participating  mineral rights I would greatly appreciate it.   Soccer Mom - can your dad recommend a company that will handle this "small" amount of mineral rights?

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