Replies to This Discussion

Permalink Reply by george m vietze on March 27, 2014 at 1:13am

Your post was informative and delightful, thanks for the tax code citing,you made my day.

Permalink Reply by 0i7okn54zwbdo on March 30, 2014 at 3:36pm

"I also do not linger where I have been shown such libelous disrespect, i.e. mislabeling my sincere and selfless efforts to save Strangers thousands if not millions of dollars; being instead called  a "penny stock-shilling huckster.""

Nobody called you that.  I called the CPA huckster a shill.  You're a sensitive fellow, aren't you?

Permalink Reply by Janice L. Hancharick on March 31, 2014 at 4:21am

Penn State just did a Webinar on this very subject.  Lots of good questions and solid responses.  It's an hour long and can be viewed @ the following site.

http://extension.psu.edu/naturalgas/webinars

Listen all the way to the end to hear responses to ALL questions.  I think you may be surprised.

Permalink Reply by Dott on March 30, 2014 at 2:40pm

Al,

Thank you for posting your info. You seem to be someone like me who likes to do a lot of research, now all of your options and be well informed. If you wouldn't mind posting your CPA's info or emailing me privately I would appreciate that. I am already leased but I will be needing a CPA well versed in O and G for future tax years. I hope to be drilled this year or next and I would like someone who thinks outside the box.

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Permalink Reply by Dott on March 30, 2014 at 2:42pm

George,

In your example no. 2, if you put your minerals into a Trust and you want your heirs to have the benefit of the value at the time of setting up the trust then it sounds like you need to pay for a valuation of those minerals at the time of the trust even before you are drilled.  Do I understand that correctly?

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Permalink Reply by george m vietze on March 30, 2014 at 10:51pm

As I understand the play, you pay for a valuation of the minerals at the time of setting up the TRUST, a very small value will be put on the mineral rights because there is no production etc., hopefully those rights will increase if the land is "drilled" in the future.  The heirs will have already had title via the terms of the trust, you have effective control of the trust during your lifetime(rights to income etc,,) upon you passing the mineral rights are NOT part of your estate.

That is how I understand the move., please educate me if that works?

Permalink Reply by Winemaker on March 30, 2014 at 4:39pm

I set this up my bonus payment two years ago, and they people I used are in Canton.

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Permalink Reply by al raptoria on March 31, 2014 at 4:45am

George's option is inverted from Arthur P Jensen's strategy (which just got a thumbs up from the 3rd independent CPA/Financial Planner/Attorney I shared it with). Both work. Jensen's strategy has you/him set up a new LLC transferring the limited formation rights to it. Then his  company and on your behalf, with legal assurances galore, buys 99% interest in the new LLC that owns the limited rights  for THE HIGHEST ethical, reasonable price.  He will use whatever part of the signing bonus YOU designate (after you take whatever amount you want now - and want to pay some taxes on now) and with the remainder he structures a payment plan for the NOTE on your limited rights you just sold the new LLC based on the HIGHEST amount reasonable agreed to for the "sale price." The highest - as it will then take more signing bonus, investment interest on bonus monies invested and royalties should they come, all with deferred taxation (see my previous post to George) to pay down the NOTE over time = time also being determined by you - as in how much $ you want to receive and at what intervals. So you see the higher the valuation (within reason) the better as the NOTE will be for more which means more of a discount on taxes and a longer payment period of income for YOU (to pay off the NOTE.).  It's about legally deferring the taxes for so long that the money you would have otherwise simply handed over to the IRS et al in the beginning will have been safely making investment profits (hardly taxed as they are going toward paying YOU for that NOTE...)so that your taxes are legally reduced AND deferred all while you are making money on what would have been taxes up front. Hope I did the plan justice  and ANYONE who has not yet leased or sold any mineral rights, again, look up the man! Arthur P Jensen (a member here but go to his website and forums/reviews of his stellar performance first! WealthServe.com. Then contact him directly. Again, both George's "trust" way works too - especially if you have generations to follow. You can even set up a Trust so no future grandkids get to blow it all on something stupid.

PS - Can't afford the Valuation - starting price is $15,000  - For valuations on land that has not been "proven" yet!  They would just be doing the same thing I can do - using the going area rates for bonuses/royalty agreements and geologic maps. It's mostly guessing at this early point - I guess I don't need to pay someone $15,000.00 to guess. :) Anyone know of a better/cheaper way?

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Permalink Reply by 0i7okn54zwbdo on March 31, 2014 at 5:38am

"They would just be doing the same thing I can do - using the going area rates for bonuses/royalty agreements and geologic maps. It's mostly guessing at this early point - I guess I don't need to pay someone $15,000.00 to guess."

That's not accurate in any way.  If you're going to pretend to be an expert and tout these "secret, rich people methods" you should try to have a better grasp of the depth of data needed to model out potential value.  Saying that you'd be paying someone $15,000 to "guess" after you just shilled for some CPA who has built a magic formula to avoid taxes (ask Wesley Snipes about his wicked smart CPA) is causing me to have serious doubts about the voracity of your claims.

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Permalink Reply by al raptoria on March 31, 2014 at 8:59am

You've doubted my veracity from my first post in this thread! So now I'm a "shill" again after your saying you weren't calling me one before... Thanks for the premature  April Fools' laugh. I'm not biting your bait, just  chortling over your attempts.  I have always said I am LEARNING, not an expert on anything except myself and a few professional skills I have finely honed. I based my comments about what Gustavson told me directly about what  they would do in my circumstances and I paraphrased it here, everything except the "guessing" term for what it sounded like to these novice ears = And that's why I asked for help here on this forum - because I am NOT an expert on valuations, just an expert on assessing character.

By the way, Gustavson was VERY good at explaining all the details of their protocol and where my humble little tract would fit into their service offerings. At the end of the discussion we all agreed that it was not in our best interest to get a valuation at this point in time if our goal is to have the highest valuation provable. I like Gustavson, admire what they do, but given so little data for them to pour over, they can only connect a couple dots and "guess" the rest.

 Anybody has anything constructive to say about my original query? I look forward to reading your serious replies.

 Thank you.

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Permalink Reply by Frank Walker on April 2, 2014 at 6:06am

Al

A shill?  Dude, you're no shill.  Gosh, you're a philanthropist, a prince among men.  No landowner following your wise and informed counsel could ever have anything whatsoever go wrong . . go wrong . . go wrong . . go wrong . .

LOLROFLMBFAO

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Permalink Reply by george m vietze on March 31, 2014 at 5:56am

The value of mineral rights that is not producing and not currently being drilled should not be very valuable.  The purpose of the transfer to the "Trust" is to take the title to the minerals from your personal name to a "Family Trust" so in the event of your passing the value bypasses your estate. Hopefully a number of year go by so the initial valuation is not the major focus of the transaction but obviously should have some independent evaluation.  You can goolgle programs that will outline the criteria that appraisers use to evaluate mineral rights and follow the information the best you can and maybe a qualified real estate appraiser could do a report of value and even if it is questioned at some point the value should not be significantly different.  The point is that the "file" should have an independent source determine the value.  Hopefully the mineral rights produce cash royalties which are easily valued but the tax will then be paid by the beneficiery(s) of the trust and spread out thereby reducing the tax further.  The main point is that if the value of the minerals escalate to enough of a number to be significant if it were included in your estate it would be wise to bypass  that obstacle.

Since my property is HBP (held by production) there will be no "bonus" money so I do not have to worry about selling to another entity and using "loans" etc., to defer taxes.  Separate entities (LLC) become separate taxpayers raising the problem of double taxation, much more accounting and bookeeping, more tax forms and obvious manipulation of arbitrary evaluations that can be questioned and if unraveled could be a big headache as well as very expensive.  I have had a tax practice in the past, years ago and have an accounting and tax background an have  structured buying real estate in a defined benefit plan through a series of options that allowed a pension plan to purchase property with debt because an option is not debt so I am all for innovative ways of deferring taxes but your going to have to walk me through your example in more detail because so far I am not onboard with the information provided.  For example I can understand that selling the mineral rights to another entity (LLC) for a value could be taxed at capital gain rates which is cheaper than odinary tax, the "bonus" could be paid to the new entity who could spread the taxes out amongst the participants but the LLC would have to pay taxes on the income not distributed and the portion paid on the carryback loan would be non-taxable to you since it is a loan repayment.

Depending upon the numbers maybe the tax savings could be substantial but their are rules on percentage of ownership of closely held entities and valuations need to be substantiated.  Transactions determined to be solely used to avoid taxes and have no other economic substance can be challenged and reversed, make sure you do not get to far out on that limb.

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