Apparently you do not know that there are very mineral owners who have substantial mineral holdings and royalties requiring employees to assist in fully monitoring activity, accuracy of royalty payments, data, etc. Many of them hold the minerals in entities such as partnerships or sub-S corporations which file tax returns taking deductions for DIRECT expenses such as wages, legal fees, supplies, Enverus subscriptions, etc. and issue K-1s. Under your erroneous logic, the royalty owners should refuse such deductions and add them back as income. I have worked with many oil and gas CPAs, in large and small firms, and every one of them deducts all of these expenses either through the entity or directly on Schedule E. You are free to overpay your taxes. That makes me laugh.
Tax basis question please? When I die, will my son need to appraise my minerals & surface, if he chooses to hold & collect royalties for his lifetime as I have? My tax basis is zero, passed down from 100 years ago, I inherited before to the Shale Revolution valorized our practically worthless property. My asset value increased after the first ever wells in 2019, but my basis remains zero. Why should he pay for an appraisal if he continues to hold inherited minerals?
Yes your minerals will be stepped to FMV at date of death. The IRS accepts ârule of thumbâ value estimates based on number of months past revenue. Consult a CPA and/or Certified Business Appraiser to determine appropriate # of months.
That said the real benefit of step will be of the minerals are sold post death. The Cost Depletion on the minerals will have to exceed the 15% Statutory Depletion to create value. Cost Depletion technically requires one to know reserves in ground at beginning of each year. Although in practice it is generally accepted to use a percentage based on a defensible life estimate of the well.
So donât pay for an appraisal. Not near worth it. But do pay a CPA or CBV a few hundred bucks to get a good basis for number of months.
Itâs a moving target. Taxable estate the taxpayer argument is 48 months wile the IRS argues 84 months. Non taxable estate those flip.
But if not going to sell and only trying to be able to take cost depletion and that is a swag anyway, there is no tax law that requires a step up at death except for purposes of a Form 706 Estate Tax Return.
I am having a problem with liberty tax here in california. Apparently nobody knows how to do the 22 % depletion side on oklahoma. Unbelievable, even the home office of Liberty Tax is stupid.!!! Also my 511 NR shows a use tax of $21. I donât live there never have. WTF is going on. Who do I call to fix this. This is fraud and theft!!!
Since you think there is âfraud and theftâ going on, maybe you should contact the DA. Since you think Liberty Tax is âstupidâ and you donât know how to claim the 22% Oklahoma depletion yourself, maybe you should hire a CPA. Good Luck with your financial partner, a/k/a Uncle Sam.
Oklahoma Tax Returns DEFAULT to ASSUME Use Tax. Just need to unclick the box. As far as 22%, I would think it is simply a mater of an override in the Oklahoma State section of the Software. Very easy fixes.