Cost Basis Estimate

Father sold mineral rights in Harrison County last year that passed to him in 2011 from my mother. Trying to get a ball park figure for cost basis of what sales were going for in early 2011.

Any assistance would be greatly appreciated

By “passed to him” do you mean your father received those rights from your mother by inheritance in 2011? If that’s right he would have received what IRS regulations call a “stepped up basis” to their value as of the date of your mother’s death. But, if that isn’t the case and he instead obtained title to those mineral rights by a gift from your mother then his cost basis would be the cost basis she had in those minerals, or if he bought them from her in 2011 that purchase price would be his basis.

Was this a non-producing mineral interest at the time he acquired title to it? If it was, and it was acquired by inheritance, even the stepped up basis amount in 2011 may be minimal.

Dusty, I appreciate your responding. Yes, my father inherited the mineral rights when my mother passed away. Trying to determine the stepped-up basis as of April 2011. It has a producing mineral interest though not that much. I know my father has received offers thru the years but he did not retain. Was hoping that someone who sold around that time could provide some information or point me where I could find.

JT Maybe someone else will respond and have a better idea but I’m thinking lease values were probably pretty low at that time.

If there was production at the time your dad inherited that interest you could apply a multiple to what the royalties were running. Say 4 or 5 times the annual gross royalty amount.

The basis amount you decide to use is only going to become important if IRS decides to audit and if that happens you want to be sure you can show that you didn’t just stick a number in there. Show them you had a method behind what you used.