Value of non-producing minerals at the time of inheritance
Can anyone explain how to determine the value of non producing minerals at the time of inheritance. I recently sold some mineral acres which are subject to 15% Capital Gains Tax. However, only the difference of what the minerals were worth , at the time of inheritance, and what the minerals were sold for is subject to the 15% tax. A "basis", of the minerals, must first be determined.
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Replies to This Discussion
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Permalink Reply by P.G. on
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Do people actually own the minerals still in the ground for which a value could possibly be placed or only the rights to reduce those minerals to possession? If one only had the rights to get the minerals, how could an accurate value be placed on the actual minerals?
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Permalink Reply by Gingerbread Latte (N7)(T9N-R10W) on
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Unfortunately, I haven't had to do this yet with royalties. I recently sold some timber on inherited land. I took the sales price, plugged it into the government's inflation calculator and calculated what the present value would have been in the year I inherited. No where near accurate b/c who knows if it was a good year for timber or not, but it was the best I could do.
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Permalink Reply by Spring Branch,mineral owner on
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It would seem so me that some basis would have been used on the Federal Estate Tax return of the deceased at the time of the inheritance. In my opinion, non-producing minerals have a value which could be established by appraisal.
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Permalink Reply by king john on
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i have inherited minerals twice and neither time were the unproduced minerals considered, in regard to the value of the estate. this leads me to believe, that if one turned around and sold inherited minerals, the entire amount of the purchase would then be taxable. this is my best guess. i would definitely consult with a tax attorney on this one.
kj
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Permalink Reply by reallyoldguy on
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This is a tough one. The minerals were never considered in regards to the Federal Estate tax of my Grandmother, at the time of her death, as the minerals had been forgotten. Now thinkng about it, they would never have been probated???
My tax advisor said that there has to be some basis for the minerals. Only the difference is taxable. I tend to think along the lines of KJ in the fact thatthe entire amount woukld be taxable. We had a hard enough time trying to determine the value of non producing minerals when I sold a month ago, let alone, what they could have been worth 10 years ago...
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Permalink Reply by king john on
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oldguy, no worry on the probate. they are not considered because they are of no value. what i mean is their very existence is unknown. the person or company who purchased them from you is completely speculating till the bit hits the ground so to speak. i would get a tax attorney rather than an accountant, knowledge and expertise...
i understand your line of reasoning, i just dont think it's applicable here.
kj
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Permalink Reply by jffree1 on
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rog, I think in your case there was some value put on the minerals in GGF's estate inventory, since part of the minerals were purchased. Your tax professional could use that for basis with some correction for inflation, most likely, since there was no production after GGF's death.
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Permalink Reply by reallyoldguy on
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GGF's estate??? Do you mean R.A. Graddy?
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Permalink Reply by king john on
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if the price of NG were considerably higher 10 years ago, according to logic, perhaps you could claim a loss??? i doubt it. let us know how it turns out. i'm sticking with my prediction of you will be paying tax on the full amount. what is our resident tax pro's name... kathy morgan? maybe run it by her or list it in her DEATH & TAXES group.
kj
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Permalink Reply by reallyoldguy on
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Thanks KJ. I completely forgot that I have an estate inventory, of my Great Grandfathers estate, at the time of his death. He has a dollar amount placed on a fraction of the entire acreage. If we do the math correctlly we should be able to get a value of the entire acreage from 1985. I'll check out the Death and Taxes discussion as you suggested. Thanks
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