Minimizing tax consequences...

I think there was a general discussion a while back but I can't seem to find it, so....

 

For those folks getting significant signing bonuses, how have you dealt with the tax consequences of being pushed into a higher tax bracket for the year you get the signing bonus? What about Alternative Mimimum Tax (AMT)? What other issues have you run into?

 

Same sorts of questions for royalty payments.

 

The reason I'm asking is that this gets into some specialized stuff and at least one accountant I spoke with was blowing smoke and clearly didn't have a clue about O&G income (signing bonus, royalty treatment, etc).

 

Mike

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Permalink Reply by time will tell on September 11, 2011 at 6:12am

I agree but don't let certain people get to you . as you can see they always reveal them selves and blame everyone else . we are thankful for this site .

They will burn themselves out . Don't play into there game !

Permalink Reply by Philip Dobeck on September 13, 2011 at 12:59am

We Put our total lease payment check into a Ohio bond fund to earn tax free income at least April 15th.

Yesterday  president Oduma announced he wants to close this "Loophole" 

 This will hurt state investment which creates JOBS IN OHIO and will have a negative impact on local ecomomies. Wow!

 

Permalink Reply by time will tell on September 13, 2011 at 4:35am

I'm not surprized . No one can take advantage of tax saving  except them and there supporters.

Robinhood strikes again .

015334grltd9mPermalink Reply by 015334grltd9m on September 13, 2011 at 5:14am
I like most here am not an accountant.  First I am a businessman landowner and my company has started growing shrimp on our land three years ago.  Because landowners are now starting to see significant incomes, our land management team has sought the advise of one of the foremost accountants in NE Ohio.  This is what we now know and we will research this tax approach more.  We have been advised that farming shrimp, aquaculture is a cost of farming.  Farming shrimp on the surface requires a significant infrastructure cost initially.  So we have been told all our cost associated with farming shrimp is a tax deduction and deferal.  For more information google Ohio Shrimp to see how aquaculture is the fastest growing part of agriculture.
Permalink Reply by time will tell on September 13, 2011 at 5:16am
Thanks . hows thing's working out for you on the farming .
015334grltd9mPermalink Reply by 015334grltd9m on September 13, 2011 at 5:38am
If the communist City of Youngstown leaves us alone we can make this an industry.  No, they rather community organize and vote for more Food Stamps and Grants.  Actually, we will be harvesting in a few weeks and the "First YoungstownShrimp Festival" begins on the 30th.
Permalink Reply by time will tell on September 13, 2011 at 11:36am
good luck in youngstown , try to be a contractor from out of town and not be union . It's not good .
Permalink Reply by Mike h on September 17, 2011 at 1:50pm
I thought of an interesting approach that might minimize taxes on signing bonus money. If the lease were signed with a company or LLC that you controlled with only a nominal signing bonus, you could exchange the shares in the Corp/LLC that holds the lease for shares of the (Public) company that is picking up the lease. This would be a like kind exchange so presumably no taxes would be due at the time of the exchange. You could then hold/sell shares in the public company as you like and better control how and when you realize the income from a tax perspective. Just brainstorming here.
Permalink Reply by michael j belaj on September 17, 2011 at 8:51pm
Mike You got it that is what I am  going to run past my Accountant. Mike
Permalink Reply by Nelson Roe on November 1, 2011 at 3:16pm
From what I have been told... If one wants to attempt this strategy, then the land will need to be under the LLC prior to signing the lease & somehow they need to seperate the mineral rights or something.  I am not sure exactly how it works, but just wanted to give a heads up that this is something that needs to be planned prior to signing the lease.  I will probably just take it to a tax advisor/CPA that is familiar with oil & gas income, let them crunch the numbers... Then take the ouch upfront so that hopefully I don't need to worry about it coming back to bite me in the backside a few years down the road!  I am sure it will be hard to part with that big chunk up front, but I would imagine it would be even harder to deal with the consequences of doing something not quite right & having to go through all the legal & IRS stuff later.
Permalink Reply by Charlie on November 1, 2011 at 11:04am

Mike-

 

Unless I am mistaken, I do not believe this strategy would work. I believe that tax free like kind exchanges are only available for swaps of "real property" and not stock. See the regs for 1031.  A share for share swap of two entities would not be tax free unless you were doing a tax free reorganization under Section 368 of the Code (i.e. a merger).

Permalink Reply by Mike h on November 1, 2011 at 2:07pm
Charlie, it's not a 1031 exchange but something else. I know that companies do this type of thing to create tax free deals but I don't know the details of how it works.

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