Question on Taxes on Bonus Payback

I received a bonus to lease mineral rights. Two wells are producing, one of which has been assessed a payback of $47,000+. I paid taxes on the bonus in 2016. Is it correct to call the 47,000+ a loss and deduct it from my taxes for 2018 which is the first year I received checks from one of the wells? I am being charged funds which were taxed. Please I would appreciate help in understanding this … Lee6

I haven’t heard of this type of thing in WV. Might this be Jay Bee? I have heard that they are putting some odd things in their leases. I am not an accountant nor a lawyer, but your idea of how to handle it makes sense. Hope someone has more information.

Yes, it is JB. I’m still researching this but I’m thinking I cannot show it as a loss in 2018. Any other ideas? I would appreciate them.

The 47000+ was to lease your land in 2016. Basically prepaid rent for the 5 year lease. The money you received in 2018 is royalties from the now producing well. The only deduction you get is the depletion per cent allowed by the IRS from the royalties. Usually 15% . So on $50,000 in royalties for a year, $7500 would be deducted as royalties and taxes paid on the 42,500 left.