Inhheritance Tax?

I talked to a freind in PA. yesterday that told me that his elderly mother had passed away last May . He told me that the state (PA) had put a hold on her properties and wanted him to hire a geologist to appraise the gas and oil under her properies so he could pay the inheritance on the appraised amount. He told me that his attorny told him that there are alot of properties in PA in a similar postion and everyone is waiting for someone to sue the state over the practice so that party can bear the expense then the rest of the parties will file using the prior case.

Has anyone heard anything about this?

I'am still amazed how important things like this dont make it into are local newspapers at all

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Permalink Reply by Billy Park Whyde on April 2, 2012 at 7:23am

VG I was only asking a question with no property really in question r even state. O am a bit appalled at the idea of the imposition of speculative values upon which a landowner would have no direct control over. 

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on April 2, 2012 at 9:02am

that's why I don't think that they charge for when there is no production record of income.

Doesn't make sense...just because there is a lease signed doesn't mean there is production, royalties, or even a greater land value....still speculative.   That is why i told you about the contact with the Dept. of Revenue I had regarding having a lease and paying inheritance taxes....they said that either taxes could be paid on present market value (not inclusive of any speculative income from royalties) or use the 'clean and green' tax amount to pay the inheritance tax based on whom the beneficiary is on their tax table.   The question is really who is being satisfied between IRS tax tables and rates and the state (in this case Pa.)....as there is rules for each of them.   Of course we all know that inheritance should not at all be taxed as taxes were paid already on the monies that the deceased had in their lives.   That is why the Bush tax code had actually made 2010 (at that time) a zero for paying inheritance taxes (that is what I saw back in 2009 for 2010 but I think that was dropped as an option.

Another thing to consider is if one has land in a unit and the well is not located on their land...would the land with the well be of higher value of appraisal than the one without though they be included in the same unit??  Would the landowner with the well be charged more taxes?   What if the landowner with the well is not the owner of the royalties?

 that is why it must be based on actual production and verification of royalty payouts.

Permalink Reply by craig on April 2, 2012 at 3:44pm

I can answer a few things. First off if a pad is located on a declared clean and green property then the acreage must be taken out of c + g and 7 yrs (difference in past taxes) paid on said acreage. This I know for sure. 11 acres with a house is the smallest parcel that can register C+G.

Remember, the tax I am talking about in my previous post is the amount your estate will be taxed when you pass. Specifically Pa State Estate taxes. What my brother did was to divide up the lease between family members now while the gas isn't worth much and they don't know  how much there is. He hasn't been drilled yet, but will be in the near future it appears.

One of his clients passed recently and the estate was worth a fortune because of royalties. Thankfully the family figured out a way to get it paid in full and keep the family farm. 

Believe me when I say that with current law in Pa, when you die, 20-30 years of royalties will be part of your estate. Now if you have a surviving spouse there will be no problem until they pass. 

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on April 2, 2012 at 3:57pm

Craig,  when the pad took the acreage out of clean and green...which made the taxes go up on that acreage...i understand that in some contracts the oil company pays the difference for the increase of the seven years or less if less as Clean and green....yet  who pays for the increase of the property tax for that acreage each year after the seven years payout was done?  Is this also part of what the oil company pays for that specific amount of land that they drilled in?   AND why should one of owners in a unit who lost his/her C & G status pay the increase now in taxes while the other owners with C & G status though in the same unit continue the lower rate yet receive royalties (assuming they receive royalties).

If you know the answer fine...otherwise I know that you are most likely not a lawyer or expert in that area...just wanting to bring up the subject just in case others are interested.   Actually that all really needed defined even more fine tuned in the actual lease agreement, inclusive of the oil company paying clean and green changes if there was inheritance tax to pay.

and the land agents wanted to get the landowners to sign on their first visit to them...ha.  Unfortunately some did.

Permalink Reply by craig on April 3, 2012 at 7:12am

I'm not a lawyer, etc...I am an informed bussinessman that has lived in this area all my life and know, or can find out,  just about anything going on in the area.

The property owners whose land the well site is located on will be paying the future taxes on the part taken out of C+G. It is one of the old O+G leases, so no the taxes won't be paid by the gas co. 

As far as the property owner who has to pay more taxes forever on a part of his acreage taken out of C+G , this particular person was paid a handsome spud fee...which would pay the tax increase for decades (we are talking 7 acres) .

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on April 3, 2012 at 10:56am

that's a good point...about  the owner receiving the well fee for locating the well on his property even though the other owners involved in the unit would not lose their c & G status if they have it....but the owner with the well would.  I just wondered if the lease contract would cover the future tax expenses from leaving clean and green status and converting to property appraisal taxes without c& g for the future years of that parcel of land being used by the wells and pad.

 I suppose it is another aspect of negotiating that clause regarding clean & green in the future if the taxes would be as high to delete whatever gain the owner may have received in the cost of the spud fee (the drilling hole fee).   You see when you have in your contract a fee paid to lessor for any well drilled such as perhaps $15k then it has taxes on that with payment to IRS and Pa for income and if more than one owner then that bonus gets depleted pretty quickly...and if there is no fee for roads, ponds, equipment storage, etc. negotiated into the contract then the owner is now paying even more by paying taxes on the property and now doesn't have as much land available for his use while others in the unit have all their top land to utilize.  Something to think about.  Most only negotiated a one time bonus for the drilling of a well...most didn't think of the other land uses on the top that would occur with a drill pad...of course they may be hoping that a timber clause would cover that...but some don't have timber clauses.

let's say if the drill pad and road, etc. used up about ten acres of someone's property...yet they got paid a one time 15k subject to irs and pa taxes (if Pa.) and even had to split that with other family members....and they now have to pay for future tax differences (since losing c & g on those ten acres and if the rollback price is the only tax increase paid by the oil companies) and they are also the ones with not as much privacy and more noise, traffic, etc. and the other owners in the unit have not lost their acreage and still have the environmental quiet and enjoyment of their land....then if the negotiations for any well pads or future taxes on the land or even covering any loss of marketability of the property cannot be overcome by the royalty production then that owner didn't even do well getting the bonus for the well.  ...especially if he /she owns only about 20 acres...with ten now being used for drilling.

Permalink Reply by craig on April 3, 2012 at 3:05pm

As always VG, you post valid thoughts. The spud fee was $25,000 in this case. 

Jim ShoosPermalink Reply by Jim Shoos on April 3, 2012 at 11:10am

Payment for "surface damages" are just that...compensation for damage to your property.  If you can in fact establish that your land did incur damages to the extent of the payment you receive then it is not taxable.  To the extent that the payment does exceed the actual diminution in value to your real property...it is taxable as normal income.

Permalink Reply by Derrick Strain on April 3, 2012 at 3:24pm

inheritance tax is the ultimate in government redistribution of wealth.....they just tie up property to be inherited, charge a goodly percentage of their believed value(with the housing bubble and crappy econemy, property tax didnt fall like the value of homes??) so people just give it over to government because its not worth the time or effort or $$$...........had  a  fella awhile back tell me "the state gives you everything at birth, you give the state everything back in your late years so they look after your healthcare needs".........as for the newspapers, media is media, they select what they wanna print just like tv news pick n choose what they wanna air......boils down to agenda i believe and controling information.

Permalink Reply by rmc on April 3, 2012 at 11:30pm

It seems to me that eventually the only people that will be able to own any amount of property in this area will be the one percenters. The rest will have to sell out to the ones that can pay what a shame .

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