Complicated Cost Basis for Inherited Mineral RIghts

In 2004 my dad died. He had no knowledge of the mineral rights because there were no surface rights or ownership. I had no knowledge of mineral rights until contacted in 2012 by a landman. An upfront lease bonus of $84k was paid in 2013. Triad Hunter filed bankruptcy. There was no pipeline or production so thought rights were a dead issue. Contacted by another landman in 2018. Sold mineral rights to speculator for $67,500. Still no production. No one I’ve contacted knows how to value for stepped up basis or capital gains taxes. US Mineral Exchange suggests taking the inflation-adjusted average price of oil in 2004 versus the same for 2018 and using the difference to determine capital gains since there was no production then and none now. M_Barnes or anyone else out there, can you confirm, deny or advise? Appraisers, lawyers, landmen and CPA’s I’ve spoken to agree with this approach once I point it out. Thanks much.

I would not be qualified to answer that question. Suggest you contact an appraiser who can give you a professional opinion that he/she is willing to sign. If you cannot prove a case, the IRS will use a $zero base and charge capital gains on the whole sale.


what is the legal, county, state for this mineral interest?

Mineral rights are in Aurelius Township, Washington County, OH. Macksburg is the city associated with this area.

You might want to post this again in the Ohio area, as folks there may be able to give you some names of appraisers for that area.

Thank you for your suggestion. I Tried…A mineral rights appraiser, a petroleum engineering prof. at Marietta College (15 miles from site), the landman I sold the rights to, the Marietta mineral rights attorney who negotiated the 2013 lease, a Michigan CPA/Tax attorney and several others. Many non-responses after repeated attempts to contact. The US Mineral Exchange is the only one forthcoming with what they consider a viable answer. Someone told me that the IRS has a specific form for mineral rights sales but I have not found anything to this effect online and to date my CPA hasn’t either.