1031 exchange question

hello, we are completely selling our minerals (and keeping the surface) but keeping a npri (non participating royalty interest). can we use a 1031x in this case are does retaining the npri prevent that? thanks.

Richard, I don't have an answer on your tax question, but I pulled up your lease in the Reeves County records, and it looks like your wolfcamp depths may be open for leasing. Have you considered leasing those deep rights instead of selling? The lease rates in that area are high, and you may be surprised what some of the startups would pay to lease it.

One of the 1031 exchange companies can probably answer your question whether an NPRI qualifies for a 1031 exchange.

thank you for your response. so far, not yet. none have been willing to go out on a limb on the npri question or, from those we have asked, we have received conflicting opinions. we do have an exchange company in california and another in oregon researching irs oil and gas tax case law on the topic but no feedback yet . . . it is conflicting and especially confusing because npri is not the same as ori (overide interest). and, of course, the group that wants to purchase we have asked their agent to look into it for us.

regards frequent comments on the forum advising not to sell minerals but take a lease. forever that has been our position and we are retaining other minerals in tx and nm for that exact reason; throughout the years we have enjoyed the bonus' on this tract. now, however, we are all retired [mother is 92] so for us it is a better calculated position to sell and keep the npri on this tract therefore our family is collectively selling our 25 acre interest. there may never be another time when minerals are bringing values as they are now in an up cycle in this basin within our productive lifetimes - and, of course, next year it could be more and probably will be barring unforeseen circumstances. honestly, opec could collapse the market in a heartbeat anytime they wish through a number of actions via any of their member countries though i think it unlikely in the near term and so do those currently on a buying spree in these stacked tight formations basins. being born and raised in the oil patch, son of a land man, and a former geophysicist, booms and busts have been the norm my whole life [data and dice define the industry] so we are, at our ages, choosing to take advantage of this emerging boom. sales price does include a $4000/acre bonus to tract operator for the current unleased deep rights which we have chosen not to execute in order that new owner can either accept the lease we negotiated (with another pugh clause, of course), renegotiate, or not lease. if, and when, the acreage is exploited [there are 1000's of drilling locations out there] and should it just gush booming with production [which we certainly hope it will] we will be happy with the income the npri provides at that point and it is also something we can pass on to our heirs either way. you know what they say, 'pigs get fat, hogs get slaughtered'; for us, in our situation, it is better to sell now but we really do need to get a better grip on the tax consequences before a final decision is reached; this forum is one of several places we are reaching out for info on the 1031x and npri issue. further comments or private 'friend' assistance is appreciated. regards and best wishes.