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Permalink Reply by Josh Willis on April 23, 2014 at 7:31am

you would have to get things lined up before the closing on the mineral rights sale. A qualified intermediary must handle the money. If you get a check made out to you, you forfeit any tax savings.

it actually isn't as intimidating as all this sounds, I did two of these last year.

First- Money from your mineral sale goes to intermediary from closing agent, title co, etc.

you have no longer than 45 days after closing on sale of mineral rights (relinquished property) to identify in writing new property (replacement Property)

You can identify as many properties as you want, not under obligation to purchase them

You have no longer than 180 calendar days to close on replacement properties.

These deadlines are set in stone, no extensions

After you identify replacement property the closing agent will request the funds from the exchange to fund your purchase.

By doing it this way the IRS views the transaction as a like kind exchange- you traded on property for another - no gain

I went through Premier Title in Cadiz- 740-942-8244 ask for Annette. She is well versed in these and they use another company for the qualified intermediary that charges a flat fee of $750 for handling the money and providing the paperwork to keep you straight with the tax man

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Permalink Reply by Robert Bond on April 23, 2014 at 8:01am

Thank you it is a very interesting concept.

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Permalink Reply by Kathleen on April 23, 2014 at 8:29am

When I was reading up on this subject doesn't, like kind, mean property, in this case, as with minerals, or minerals only?

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Permalink Reply by evan on April 23, 2014 at 8:42am

I think it's just an amount thing. You could use your proceeds to by someone else's mineral rights or property

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Permalink Reply by 0i7okn54zwbdo on April 23, 2014 at 10:13am

If you sold your royalty you could put that money into a royalty trust (PBT is a big one) and it would qualify for 1031 benefits.  Like-kind has a specific definition, so before doing anything find an accountant who is familiar with it.  And not "familiar" in that they started doing it last year.  I mean Texas-style familiar.

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Permalink Reply by Josh Willis on April 23, 2014 at 4:01pm

Like kind is a fairly broad term in this instance, meaning property for property. Since minerals are an interest in property they certainly apply. We actually did one for a pipeline Row because it is considered selling an interest in real estate. You can do an exchange on nearly anything as long as they are in same category. Minerals are considered real estate for exchanges.

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