Does this sound right?

I got approximately $370,000 bonus for a lease. I am in Pennsylvania. My tax guy says I will have to pay about $112,000 in taxes. Is this right or am I missing something? Any ways to reduce this tax burdon? I bought ten acres this year with mineral rights for $100,000 and he said I could not take that off. If it were for a rental property, then would that make a difference? Any insight is appreciated, and thanks in advance. Mike

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Permalink Reply by Kathleen on March 20, 2013 at 8:37am
I know everyone is going against this but I remember reading if you put the money right back into the same investment those monies are tax deferred until you sell that second purchase.
Now maybe its only on the sale of royalties or royalty income, but its worth a call to just make sure.
I've called the IRS before over a managed woods cut and they were very nice and helpful. I did not get the answer I wanted though. I wanted to write off a chipper since those tree tops just had to go and a chipper was the only way I saw it happening under 10 yrs but they told me I could not write that off the gain.
Congrats on your bonus!
Permalink Reply by Farmer John on March 20, 2013 at 9:16am

IRS 1031 Like-kind Exchange may be a strategy to avoid taxes for now.  Can be done, Not as simple, nor straightforward as some may think. Here's link:

http://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031

 

Good Luck

Permalink Reply by Ireland on March 20, 2013 at 7:05pm

like-wise exchange I think has to be done with 45 days.

Permalink Reply by Kathleen on March 20, 2013 at 7:47pm
That's the exact IRS law I researched.
Permalink Reply by Michael Allen on March 21, 2013 at 10:19pm

The 1031 Exchange is really your only option at this point. It may be too late if you have already accepted the check. Most times I've seen this used was declared before the check was issued. You need a really good CPA to guide you through this and if your current CPA didn't forewarn you, get another one.

Permalink Reply by Tom Brian on March 21, 2013 at 3:28pm

Maybe check again, sounds like this could be done as a capital gain or unearned income at 15% in 2012 and also maybe some depreciation of sorts??  assume you owned land more than one year, would check farther before writing the check.......

i aint a tax person but you should look for one.

Tom

Permalink Reply by John OBrien, landowner advocate on March 27, 2013 at 9:12am

mike,

Looks like you are getting plenty of sound advice from some folks that have shared your experience.    Maybe you have a favorite charity, even your church if you are inclined.  Don't know for sure but I think any donations to these would be completely deductible.  Congratulations on your check and good luck.

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