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Damien Bosco
Damien Bosco, Attorney
Category: Estate Law
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Hi, This question is more about the Taxes that will have to

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Hi, This question is more about the Taxes that will have to be paid for inheriting a long held family ranch. The land is currently grazing pasture, however they will be drilling of oil on it soon. What is the current law, that may effect the price of the land is they find gas or oil? What would the taxes be based on.? If inheriting the ranch would there be taxes to pay, ranch is not located in the same state as beneficiary.

thanks slp
Hi and welcome! My name is XXXXX XXXXX I will be assisting you. I am happy to help.

The estate tax is based on the value of the assets at the time of death. The estate tax is based on the state where the decedent resided or the land is, not the state where the beneficiary lives.

The price of the land when there is drilling can increase or decrease the value of the land depending on the circumstances.

A well can add value or reduce value. A well that is distributing nice royalty checks to the landowner enhances property values. However, as the well ages and production declines, this value is reduced unless offset by increasing oil and gas prices. Unsightly wells and production equipment can depreciate a property’s value. If the property receives free gas from a well on the premises, that is a significant improvement to the property’s value.

I hope this response answers your question. If you need clarification or follow up, let me know. Best regards, Damien
Customer: replied 3 years ago.

Hi, The appreciation to the land when a well may or not be on it.. perhaps a horizontal drill below is what I am curious about. When the ranch was passed in the last inheritance there no way to value the land. Now when people ask to buy the royalties it does put a calculated value on the mineral rights of the grazing pasture.


What are the current law regarding paying for inherited ranch land with great value because of the mineral rights. I have heard of families having to sell their property because of the taxes imposed. This would be a brand new well just drilled. The flow would have not had the time to prove itself over time. But I do not think the IRS would really care about that in the initial estimate of value.


From grazing pasture land to producing well is quite a leap. My I did not inherit the bonus money paid with the original lease.


Can you give me any incite on the taxes that would come due on 480 acres. I know that this is not a whole lot of acreage, but is has been in the family for over 100+ years. Even if the well proves to produce it would be a number of months before the royalties would come in on a regular basis.


Thank you for any educational advice on this subject.



Hi Linda: The IRS will consider the present value of any royalty payments that may come to be in the future. Also, the IRS will consider mineral rights as an asset. In other words, the IRS will put a present value on future profits, which would be subject to debate and negotiation with the estate. A valuation expert would have to testify. With regard to the taxes, it would be 40% of anything over $5.25 million based on 2013 estate tax code. It is unfortunate (to say the least) that some people have to sell property to pay for estate taxes because of the value the IRS puts on the property due to oil and mineral rights. I hope this helps you understand the issues better. Best regards, Damien
Damien Bosco and other Estate Law Specialists are ready to help you
Customer: replied 3 years ago.

It amazes me 40% is outrageous. Mr. O is picking on the bottom of the upper class, they need to raise the limit.

I chose to help the person live through the years that the limit was lifted somewhat.


They should have extended, or raised permanently

Thank you.... its the future royalties that have not come in yet that is part of the crime.


But the gov can spend ... even if they do not have. The do not allow the same of the tax payer.


thank you for info. .


I will get off my box.


Your welcome! Best regards, Damien