In 2011 I inhereited 3 acres with a producing well that was paying approx 200.00 per month. Last year I sold my interest for 230,0000. I was getting approx 75.00 a month from the well for the last 3 years. My question is can I take a loss on the sale or would I have to pay any capital gains tax.
Your help would be appreciated.
Your gain or loss is calculated as Sales Price Less your Basis at date of sale. Basis of inheritance (generally the value on the estate tax return or market value at date if death) Less Depletion deducted on federal tax return. You only have a loss if the basis of your minerals exceeds the sales price. You should consult your CPA.
TennisDaze nailed this. I am a CPA and she is correct. You would need to get your basis from the estate from which you inherited the property. If it was a reasonable sized estate, the executor would have had to compute the basis in the assets as of the date of death. Depending on your relationship to the deceased, your basis would be that value, subject to an increase over the testator's basis. Depends again on your relationship. If you are not a spouse, the amount of increase that can be added to the testator's basis might be limited. But if the executor lowballed the value, you are pretty much stuck with a cap gain and ordinary income item. you would "recapture the depletion" and the sales price allocated to that would be ordinary income.