# Surface Use Agreement
**URL:** https://www.mineralrightsforum.com/t/surface-use-agreement/16056
**Category:** Surface Owner Issues
**Created:** [May 6, 2013, 6:23pm UTC](https://www.mineralrightsforum.com/t/surface-use-agreement/16056 "2013-05-06T18:23:55Z")
**Posts on this page:** 3
**Page:** 1
### Author:  [@DCole1](https://www.mineralrightsforum.com/u/DCole1)
#### Post date: [May 6, 2013, 6:23pm UTC](https://www.mineralrightsforum.com/t/surface-use-agreement/16056/1 "2013-05-06T18:23:55Z")
Does anyone know if the pay items in the surface use agreement, i.e. $15,000 per well drilled, is taxable income? I have heard that it is considered liquidated damages and not taxed by the federal government. Thanks!
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### Author:  [@Buddy\_Cotten](https://www.mineralrightsforum.com/u/Buddy_Cotten)
#### Post date: [May 7, 2013, 4:23pm UTC](https://www.mineralrightsforum.com/t/surface-use-agreement/16056/2 "2013-05-07T16:23:34Z")
Dear Mr/Ms Cole,
This is truly a CPA question that depends on how aggressive you and your accountant are on claiming deductions. A certain percentage would easily be claimed as damage, which you would not claim as income, but a reduction in the basis of the property. The Feds will generally not get too upset at 33% claim for damage. I have seen 42% not challenged. It is best for the payment to be in two checks -- one for rentals, one for damage.
So, the answer is - do not listen to me or anybody other than your accountant. Do mention to him the reduction in basis option.
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### Author:  [@system](https://www.mineralrightsforum.com/u/system)
#### Post date: [August 15, 2018, 2:09am UTC](https://www.mineralrightsforum.com/t/surface-use-agreement/16056/3 "2018-08-15T02:09:33Z")