pad fee

If you have a well pad on your nproperty and have recieved a pad fee how are you treating it on your taxes

Views: 1796

▶ Reply to This

Replies to This Discussion

Permalink Reply by Dexter Green on September 15, 2014 at 7:53am

It's gross income.  That's as far as I can go with it.  You need an accountant to answer this question.  Change the name of this thread to entice them in, perhaps.  Something like: Hey accountants!

Permalink Reply by Barry D on September 15, 2014 at 9:46am

Dexter,

I also am not an accountant.

Couldn't this payment be treated the same as the damages payment on pipelines ? Isn't this treated differently ?

I also agree an accountant should be consulted

Permalink Reply by John on September 15, 2014 at 9:15am

just as you would royalties. Ordinary  income.

Permalink Reply by James Foster on September 15, 2014 at 9:55am

I think you are going to have to check with your accountant.

I agree it is ordinary income but it is more like bonus payment which is treated as rent.

Royalties there are possible deductions for depletion.

Permalink Reply by jason irvine on September 15, 2014 at 10:54am
How much does a landowner get paid for having the pad on their property. By the looks of it that property losses all value.
Permalink Reply by John on September 15, 2014 at 11:03am
$30,000
Permalink Reply by James Foster on September 15, 2014 at 12:17pm

Can you explain how the property loses all value? I do not believe this is true. Most of the people with pads near us are farmers. Their families have had these farms for many years and their children will continue to farm them. Farms have had Christmas trees and tanks on them for many years ...100 or more.

Permalink Reply by jason irvine on September 15, 2014 at 12:42pm
30th. John could you break that down a bit.

Mine is a hunting camp and the pads seem to take up quite a bit of space.
Permalink Reply by jason irvine on September 15, 2014 at 12:44pm
James. I am also talking about just the area the pad sits on is gone, not the land around it. I've got 80 acres if the pad is 20. I've got 60 I can hunt on now.
Permalink Reply by James Foster on September 17, 2014 at 2:48pm

Seven to eight acres near us. You could still hunt up to the fence.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on September 15, 2014 at 12:58pm

Jason,

     That should be $30,000 per well as a Spud Fee.

You better bet the state will charge you plenty for Real Estate Taxes. The value will probably go up rather than down. My property value shot up due to some real nice soil the state found on it. The soil has been the same for hundreds of years. I think they found something valuable below the soil but haven't figured out how to tax it yet so they increased the soil value instead.

Permalink Reply by David Mohn on September 16, 2014 at 5:59am

6000 per acre seems fair but when you break it down a person is not really making money on that end.  First look at the rental income you could get for the farm land.  Good farm land can rent for 200.00 per acre per year.  At that price, a person in 30 years will earn that 6000 per acre.  On side you have to look at the time value of money.  Yes, that 6000 you can invest and make money on it.  On the other side, that acre of land is no long used for farming so you loose that agriculture discount on real estate taxes.  At least in Ohio you would.   Take that a step more and the land might be valued at commercial value with even higher taxes.  So you time value of money might be offset with higher taxes.   So now you look at will that well pad be there for 30 year.  If more than 30 years the land owner loses if less then landowner wins.   Either way the landowner really doesn't make much by having the well pad.  Plus depending on where the pad is, you have to look at it everyday.   Don't get me wrong about a pad.  If they were going to drill my property and put a pad on the land, I would not fight them, I would just try to get the oil and gas companies to pay the increase taxes if there is any.  6000 per acre seems like allot but when you break it down, its OK.     I would also take VERY good images of the land before the pad is started so when the well is done and the company has to put the land back the way it was, someone in the family will have images to show what the land looked like.  I would also have a represenitive from the company sign the images so it will hold more clout 30 years down the line.  

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service