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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12679
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My husband inherited mineral rights in WV. we live in Ohio

Customer Question

my husband inherited mineral rights in WV. we live in Ohio and he is 75. if we sell those rights do we have to pay taxes on the amount we receive.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Good Morning. My name's Lane. ... I can help you here.

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When you sell mineral rights it is treated as a long-term capital gains sale (IRC §1231) as long as it has been owned for more than one year.

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Capital Gain = sales price minus basis

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Normally basis is your purchase price. But when rights are inherited, you'll have to make an estimate of what the market value of these rights would have been on the date of death of whomever left the rights to your husband. THIS becomes your basis for capital gain purposes. (thereby lowering your gain from what it would have been if he had purchase originally OR is this had been a lifetime gift)

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(This is called the "Step-up" in basis at death)

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Another benefit will be that inherited assets always receive the lower Long Term Capital Gains rates, when the inherited asset is eventually sold.

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Long-term gains are taxed at

  • 0% if taxable income falls in the 10% or 15% marginal tax brackets
  • 15% if taxable income falls in the 25%, 28%, 33%, or 35% marginal tax brackets
  • 20% if taxable income falls in the 39.6% marginal tax bracket

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Expert:  Lane replied 1 year ago.

In the event that you use Turbotax to do your taxes, here an example of how this would be entered:

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https://ttlc.intuit.com/questions/2713096-where-do-i-enter-capital-gains-from-the-sale-of-gas-mineral-and-oil-rights-from-another-state

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And here's the IRS guidance on this:

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https://www.irs.gov/taxtopics/tc409.html

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Please let me know if you have any questions at all, before rating me

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit") ... Otherwise I receive no crediting for the work here.

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Thank you!

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986