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We cashed out our mineral rights and are wondering if we put…

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We cashed out our...

We cashed out our mineral rights and are wondering if we put that money into a trust for a non profit if that will help us avoid paying the inheritance tax. The amount is $80,000 or can we give that money directly to the non profit for purchase of land? Or can we buy the land and gift it back to the non profit? Basically we are involved with a non profit that is in need of a building for thier church and we cashed out this to buy that property for them but our account is telling us we have to pay taxes on the inheritance no matter what.

Submitted: 6 months ago.Category: Finance
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12/7/2017
Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Finance
Satisfied Customers: 2,504
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Hello my name is ***** ***** I will be able to assist you today.

The process to donate the inherited $80,000 is a two step process.

The first step is to determine if there is any taxes due on the inheritance. To do this we need to know your cost basis in the mineral rights.

Do you know the value of the inherited minerals when you inherited? - This will help us establish a cost basis

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago

After you determine if you owe taxes, then you would pay any taxes due and contribute the remaining funds to the charity. The donation will lower your total tax due, if you do in fact owe any tax on the inheritance.

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago

If you have any additional questions please let me know.

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Customer reply replied 6 months ago
The value is $80k which is what we are donating
Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago

Was $80K the value when you inherited the mineral rights?

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago

The taxable amount of the mineral rights will generally be (depending on how you inherited the mineral rights) The difference between the value when you inherited the property and any appreciation of the mineral rights.

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago

If you are selling the mineral rights shortly after receiving the right then you most likely will not owe any tax.

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago

To answer your initial question:

You do have to pay tax on any gains from the inheritance that were made between the time of the valuation date of the estate to when you sold the mineral rights.

___

For example: if you inherited the mineral rights 6 months ago and the mineral rights were appraised at $80,000 and you sold the rights for $80,000 then no tax would be due.

___

Alternatively, you could gift the mineral rights to the non for profit and then they could sell the mineral rights.

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Customer reply replied 6 months ago
Our parents told us years ago about giving us mineral rights but we just cashed them in a couple of weeks ago, so when does the "inherited" date begin? Technically we received the inheritance once we cashed it out correct not back years ago when we were told that those are our rights to sell.
Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago

The inheritance date would be the date you legally received ownership of the rights.

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago

A typical scenario is for parents to inform their children that they will inherit the property or in your case mineral rights at some point in the future.

Generally, that point in the future occurs either due to the passing of the parents or an outright transfer while one or both parents are still alive. The two scenarios have very different tax treatment when it comes to determining the basis.

Please let me know how and approximately when (the best you can) you inherited the property.

Thank you!

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 6 months ago

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