Fair Market Value of Non-Producing Mineral Rights (for IRS purposes)


I am filling out our taxes and I have a question about the fair market value of non-producing mineral rights.

In 2013 my husband found out he was the inheritor of some mineral rights in North Dakota. It had been part of an estate for an ancestor of his who died in the 1950s, and he only recently discovered it was his because a gas mining company did the legwork to figure out all the descendants that are alive today that were supposed to inherit all the fractional shares.

The inheritance technically happened in 2002 after his grandmother passed away and the trust was released to him on his 21st birthday.

He decided (after much deliberation) to sell the mineral rights to a gas mining company, also in 2013.

We are now trying to calculate the capital gains tax we owe for that sale. We need to know the fair market value of the mineral rights in 2002 when he technically inherited them. At that time, they were non-producing. Does that mean they were worth $0? If not, how can we calculate their value? Would it even be worth the time, effort, and money to find an appraiser?

Is there any official guidance from the IRS that would be helpful in this matter? (I haven't been able to find any on their web site.)

Thanks everyone for your help.

Dear Ms. Higgs,

The value should have been set on the inventory of the grandmother's estate. That would be, I would think, your husband's cost basis.

This is really a CPA/Tax Attorney question. I suggest that you seek one out.

Since the date of inheritance was prior to the Baaken explosion, etc., the mineral value of non-producing minerals should have been nominal due to the speculative nature only. If the property was non-producing, non-leased, is what I mean.

Buddy Cotten

Unfortunately his grandmother did not know the mineral rights belonged to her when she died. As I said, the gas mining company did the work to figure out who all the current living descendents were of the original estate from when the original ancestor died in the 1950s.

We do not want to hire the services of a professional if the rights were worth $0 (or nearly $0) in 2002, as our tax savings would not be substantial enough to offset the cost.


–Mister Cale Higgs

Dear Mr. Higgs,

You can never have a problem if your cost basis was $0.00 in the properties. I personally would assign some number, perhaps $100.00 per acre for non-leased, non-producing acreage prior Bakken.

This does not mean that a few minutes with a real tax advisor (not the ones in the mall) would not be dollars well spent.


Buddy Cotten

I leased our land 3 years ago and Jackson Hewitt put it in our income tax return. The amount was in there and we paid tax on it. The lease expired and was not rnewed. How does this effect our return for 2013 ?. jack Tucker jackfran@wowway.com

Does anyone know of any companies leasing land in Sheridan County, MT for Oil & Mineral Rights?