I am contemplating selling my royalties in Weld County Colorado and I am just curious about the capital gains tax. How is that determined? Or will I simply have to pay 19.63% (15% federal + 4.63% state). I inherited these mineral rights and do not know what they were originally bought for. Any input would be appreciated. Thanks!
Bill,
Much depends on the value of the minerals at the time of death of the grantor that passed the royalties on to you or if the royalties were generated on your watch. I assume you are not selling the mineral rights but just the royalty rights. If so, "friend" me and I will give you the name of a CPA in Colorado that is well versed in what you can do should this turn out to be ordinary income.
" I assume you are not selling the mineral rights but just the royalty rights." What is the difference? I currently receive monthly checks of royalty payments, what is the difference if I sell the royalties or the mineral rights?
Bill,
The royalty rights may be tied to a lease. When the lease expires so do the royalties. Ownership of the remaining non-producing minerals stays with the mineral owner. For example, in your area, if you had sold the producing royalty rights to a "J" sand well and it had been plugged and abandoned, the rights to the Niobrara shale would still be yours or your heirs to deal with. Whatever you do, make certain you are getting a fair price for what is being sold. In multiple pay zone areas, like the DJ Basin, mineral rights can be much more valuable than royalty rights.