I have recently received a check for past dividends owed to me on my mineral rights that I have leased in Pecos County and I also have received a check for the sale of other mineral rights that I owned in Pecos County. Can anyone provide me an idea of the amount of taxes that I will be paying on the dividends and, also, the sale of the mineral rights? I realize you may not be able to tell me the exact tax percentage I will be paying, but I would like an idea so that I can set that amount aside. Thank you in advance for your help.
I found a good CPA, who helped me
You have to figure out your basis for the property to determine your gain on the sale. This will possibly require you to find a mineral appraisal company if you don’t know the basis already. Then, look up an income tax calculator online to figure your estimated tax owed. Any other sources of income will affect the bracket you’re in, so we can’t really help you without knowing a lot more of the fine details.
I forgot to second what TwoShoeBeagie wrote about the cost basis in the minerals you sold. If they were worth “x” when you obtained them and sold for “4x” then the amount you would be paying long term capital gains tax on would be 4x minus x = 3x. If they were worth “x” when you got them and you sold for “x” then your cost basis would be zero. Long term capital gains tax applies if the minerals were owned by you for more than one year.
I believe if you owned the mineral rights that you sold for more than one year, those proceeds will be taxed as long term capital gains. If you owned for less than a year and sold, then the proceeds would be regular income. It is my understanding if as a single person your income, including the amount realized through the sale of the minerals, is less than around $40,000, there would be no long term capital gains tax. If your income, including mineral sale proceeds, is between approximately $40,000 and $400,000, then you would pay 15% of the sales price of the minerals. Above $400,000 the long term capital tax increases to 20%. I am definitely not an accountant, so please seek out expert advice.