Cost basis estimate for inherited mineral rights in Eddy Co, NM

Accounting and Taxes
1

I inherited about an acre of mineral rights in the NE/4 section 35 T23S, R27E in Eddy County, NM in January of 2005. I sold the mineral rights in January of 2018.

The mineral rights were leased for oil and gas and under production. My royalties the first 12 months I have record of (July 2004 to June 2005) were $106.30. The last 12 months (June 2016 to May 2017) were $6.09.

Is there a way that would be acceptable to the IRS to estimate the January 2005 value (basis)? At my income level I don’t owe any federal capital gains tax. However, I will owe AZ and NM taxes if I use a 0 cost basis.

My guess is that if I hire a mineral appraiser, it would cost more than the taxes due.

Thanks

2

@TerryinAZ Hi there. I have a similar inheritance situation. Did you find any resolution here like an appraiser, or did you go with just the $0 cost basis? Thanks so much!

3

After looking up the IRS Requirements for establishing mineral estate values it appeared very difficult to do and if an appraiser was able to do it, probably very expensive. I was able claim it as a long term capital gain, 0% in my tax bracket. I did have to pay AZ and NM taxes, much less than what I imagine an appraisal would have cost.

4

@TerryinAZ Thanks for the reply. I really appreciate it! I think I’m in the same situation. Best!