We recently sold residual mineral rights to some property my family had disposed of about 20 years ago. How would I determine what the value of those rights would have been at that time in order to determine what base to use for tax purposes today?
Just take the last lease amount from that time, 3x to 5x to keep it simple.
No lease has ever been done on this particular parcel. Just looking for a ballpark estimate of what it should have been worth at that time. All I know is what the property sold for in 1994/5, but have no way of knowing what value the mineral rights would have been; is there a percentage we can use?
Maybe there is an amount listed in a probate from when it was inherited?
Don't have info on probate, as it was sold while my grandmother was still alive, then passed on to my mother, brothers thru a living will. Only thing we have is the recorded deed showing the interest in the mineral rights. Isn't there some correlation between the value of a piece of property and the mineral rights?
Hi, Roy -
Am I correct in my assumption that you want to determine the value of the minerals 20 years ago?
I suppose today you could say that they were worth what you got for them.
But, If they were not producing 20 years ago, then for tax purposes they would have been valued at $0.00
In Texas, Non-producing minerals are not taxed. They are not even included in an Estate's Inventory and Appraisal (If they are, they will be assigned a value of $0 or $1.00).
If this doesn't properly address your question, then I would advise you to contact a Tax Professional familiar with the Oil and Gas Industry.
Hope this helps -
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
I just thought that land, particularly that which is sold in Texas, would be worth more if sold with mineral rights than without. As I understood it, at the time our property was sold, the purchase price was higher because we included a portion of the mineral rights, along with executive rights to the buyer.
Well, yeah, including the mineral rights can affect the sales price of a piece of land. I just don't know of any standard formula to use to arrive at how much. Just some number the parties agree to.
If you can refer me to someone who might know what prices of oil/mineral rights were worth 20 years ago, please let me know. My brother and I were kept out of the loop, mainly because the property was intended to stay along family lineage, which did not include our father. As a result, we did not even know of our involvement until a previous owner looked into it and contacted me after both our mother and father had passed; the mineral rights had been passed to our mother and brothers without my fathers knowledge. So now, we are faced with a large tax bill unless we can establish a base price for the rights at the time we actually received them that is lower than what we just sold them for.
You ca probably find a Petroleum Engineer or some sort of Appraiser to determine what mineral interests were worth 20 years ago, but why do you owe taxes on it at all?
No one pays taxes on inherited mineral interests unless they are producing. Are the properties producing?
Do you have some sort of paperwork from a Taxing Authority, like a Tax Bill or something, that you can upload a copy of or send me in private?
Since I have now sold the remaining mineral rights, it becomes a capital gain, taxed at the rate of 20%. If I can raise the base from 0, I can lower the tax.
Well, then the least expensive (free) way to determine what minerals were selling for in your area 20 years ago (1995) would be to take Jay Pruitt's advice and ask around (Whoever has the Executive Rights now or the County Clerk's Office, etc.) and see if they can remember what the Lease Bonus Rates were back then and multiply that by between 3 times and 5 times.
3 to 5 times Leasing rates is a pretty standard industry ballpark value.
I will certainly try that then.
Thanks,