Dear Joyce,

Thank you for your question.

This is termed a mineral lease by the IRS even though it may be a single payment. It is a lease becasue it is not transfering ownership, but mearly allowing use of the land for exploration of oil, gas, or mineral. So yours may be a one time payment lease. or single payment lease as they are sometimes called.

You are correct that it is taxed as regular income.

Before I can tell you how it is reported, I need to know something about the terms of he lease.

Does the lease permit merely surface exploration? or drilling, and extracting of mineral (oil and gas).?

Dear Joyce,

so how does one get to be proficient and qualified at tax as an international HR consultant?

Welll

1. 28 years of military service, in which I was trained to do the VITA function for income tax preparation for my soldiers and family members, and rear detachment persons.

2. Then Certified as a GPHR which includes modules on International TAX

3. 7 years corporate where I coordinated and handled expat taxes in concert with Ernst and Young, KPMG, and PWC. (internationally including tax equalization estimates)

4. Member of the IRS Tax Advocacy Panel (TAP), appointed by the Secretary of the Treasury, so for the past two years, working directly with the IRS and a panel of tax attorneys and enrolled agents in fixing IRS issues.

It surprises me that as an international HR consultant, you have not developed the expertise of working with international assignment issues, which are international employee relations. Tax Treaties, totalization agreements, tax equalization, hypo tax calculations, calculations of tax for deferred comp, equity compensation, and so forth.

And, I am currently the senior HR consultant for the Women's Venture Fund in NYC (pro bono), and their small business tax consultant.

I will get your answer in a minute. I have it saved to disk.

The IS directs how this is to be done. just want to get the references for you.

The key is that they intend to use the lease for production, which means this income is subject to depletion allowances and expenses. let me get the information you need.

The problem I was having is that the language you were using and lack of detail about the contract were not matching IRS regs.

Your answer is then:

1. If this contract is a true lease, and based on the content you provided, it is reported on Schedule E. If they actually find and start extracting product, you will be entitled to depletion allowances. If your lease is like typical mineral leases, it probely allows for payments of royalties if they start extracting. These too are reported on the schedule E.

2. If this were a permanent relinquishment of mineral rights, then it would be considered not a lease, but a sell and would be reported on schedule D.