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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15735
Experience:  15years with H & R Block. Divisional leader, Instructor
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I sold my mineral rights for $211,100. How will that be

Customer Question

I sold my mineral rights for $211,100. How will that be taxed?
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.


If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of section 1231 property, not royalty income. The sale is subject to capital gain or loss treatment on Schedule D (Form 1040) and form 8949.

If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance.

If you sold the rights completely this is a capital gain or loss. The tax you will pay on the $211K depends on what part of that is gain over your basis.

Your basis in the rights depends on how you acquired them.

Expert:  Robin D. replied 2 years ago.
Please let me know if you need clarification.