How To Determine Past Fair Market Value of Mineral Rights in Love County Section 25 Township 7, South Range 1 East

#1

I was approached to purchase the mineral rights to property I own in Love County Section 25 Township 7, South, Range 1 East. I inherited along with my two siblings in Nov. 2012 for $6,000/ nma. My portion is 11.1 nma. Before I decide, I need to know the fair market value for tax purposes and to determine if the offer is fair. At the time it was inherited it was not under lease or production. It’s been under production with XTO for the past few years. I have seen in other blogs that if it’s not under lease or production, the mineral rights are basically worthless, and an acceptable means to determine the current fair market value for tax purposes is to take the past few years average of production multiplied by some factor. But, is this acceptable to determine the fair market value for a past date?? Any help is greatly appreciated. Thanks!!

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#2

Suggest that you contact an accountant for an accurate answer. I am not an attorney, so the general answer is that you have to know the market value as of the date of acquisition. Even if it was not producing as of that date, it had some minimal value which a local appraiser could better establish. You probably cannot use the production that started after the date of acquisition-this is why you need to talk to an attorney or accountant. If you cannot establish the value, the IRS will call is zero and you may have capital gains tax on the whole sales amount.

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#3

I was afraid of that.
Thanks for information.

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#4

You can research yourself online. Just keep a copy of your “math” to show how you arrived at that figure. It will be a subjective number, just try to represent the facts as you could find them and you should be okay.

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