Edgemarc Paid up 5 year lease  on  200+ acres 

 

The bonus payment is paid in one lump sum.

My tax preparer insisted it must be reported as that entire lump sum in the year received.

I decided to check with Dad's tax firm. They said report equal 20% each of the five year lease term and pay estimated payments..

It's rent. It's rent for five years. Each 20% is in return for one year's right to explore for and produce gas & oil.

Yes, there is a risk of IRS audit and eventual rejection of that position, they advised. But not a lot of risk in their estimation.

Since the difference between the two approaches is nearly six figures, and I have zero doubt that I can much more responsibly spend that money than the varied governments taxing me...I'll choose to go with the 5 year treatment.

Anyone care to share their experiences with their chosen tax treatment of Edgemarc leases covering significant acreage?

Views: 271

Replies to This Discussion

What township are you located in? Shell paid in full 4 months after the signing. No clue about Edgemark.

The bonus is paid in full as stated.

The issue is how that bonus is to be treated tax-wise.

The acreage is located in Allegheny & Venango townships.

Pretty simple although not what one wants to hear the money is to be taxed in the year received.
If you want to pay over a five year period you would have to receive the money over the five year period.
At least that's what I have been told by different tax attornys
One more suggestion if I were you I would want to know how much it could cost me to be wrong. Other words how much could it cost me in five years when the IRS decides to audit and access penalties and interest ?

My understanding is that if you don't report your income correctly, the penalty is double what you owe.

One could end up losing the farm.

RSS

Local Groups





Blog Posts

Lancashire For Shale and Cuadrilla Show Us How to Teach Shale

Posted by Thomas J Shepstone on November 17, 2017 at 12:14pm 0 Comments

Lancashire for Shale and Cuadrilla produced a great video which does a fantastic job of explaining the geology involved in fracking.

Our friends at …

Continue

Events

November 2017
SMTWTFS
1234
567891011
12131415161718
19202122232425
2627282930
       

© 2017   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service