BONUS MONEY!

FINALLY GOT OUR BONUS MONEY KIND OF SAD THOUGH ON HOW MUCH TAXES YOU HAVE TO PAY THE GOVERMENT WHEN ITS OUR LAND. WE PAY THE PROPERTY TAXES AND WE PAID FOR OUR LAND. IM STILL GRATEFUL FOR THE MONEY JUST CANT UNDERSTAND HOW THE GOVERMENT HAS TO STICK THERE NOSE IN EVERYTHING.WE SIGNED BACK IN DEC 2011.

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Permalink Reply by Linda A on May 10, 2012 at 3:00am

Thanks Tim - education is important and to improve the quality of our lives should come first, before D.C. 

*charity

*gifts to churches

*gifts to children/grandchildren

and, as Tim noted, new heating system to keep us nice and warm and updated windows qualify for tax credit as well.  From what I've read, if your windows are over 10 yrs old, an upgrade would be significant in saving heat. 

CPA should be advising you how to SPEND that 40% BEFORE paying it out in taxes!

Permalink Reply by Craig on May 10, 2012 at 6:06am

Linda,

 

DO NOT think of having them spread guaranteed payments out over several years - if you do this, and are audited, IRS will have you pay the taxes on the WHOLE amount in the first year even though you do not receive it until years later.

 

To avoid the front end tax issue, the old mehtod of Delay Rental payments works better for you - and you can even design it in your lease where it will only be taxed at the amount you receive each ytear, but there has to be the risk of not receiving it, and then IRS does not tax it all in the first year. 

 

As far as the IRS rules - you did not sell the property, it is only rental/lease monies, so no cost basis in the income, therefore it is taxed as regular income, with no basis of write-offs against it. 

 

 

Permalink Reply by Jim Litwinowicz on May 11, 2012 at 3:36am

If you accept a delay rental option, it may cost you money.  Say the rates are say $600/acre/year for five years instead of $3000 up front. In all leases with delay rentals, its states that the rental payments cease once a well is drilled. (Leases vary in language ....some will say when a well is in production) That means if they drill a well in the second year, they do not have to make the final three payments.  That would a loss of $1800/acre. Much better to have paid the taxes on an upfront, paid-in-full payment.

Now if no well is drilled, then you will come out ahead by paying less taxes. Just make that decision knowing the risks of either choice.

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on May 10, 2012 at 4:24pm

congrats Cathie and family!!   you can see from these posts that others certainly have interest in what you stated about taxes.

I thought I would mention to you and others here that unless you do something in how you develop or save those monies that in the event any that receive those bonus monies after paying taxes pass away then their heirs again have to pay taxes called inheritance taxes and in some cases that could be quite substantial and even possibly for some even losing the farm or property because of the high amount.    If the monies are in bank accts that have beneficiaries listed or property is put already in another's name then only those assets that were not specifically designated end up in the estate and are subject to estate taxes and to the inheritance tax if so your state requires an inheritance tax.   

 Example if one has 200k in a bank acct. and there is a named beneficiary or joint holder of the acct. then that money isn't in the estate...yet if unnamed and ends in the estate then the inheritance tax (possibly even for the state inher. tax) may apply ...and then your heirs would be paying estate taxes on the same monies you just paid on the bonus monies.    It happened that when my dad passed that the accts that held the bonus monies went into the estate and fortunately because the entire estate wasn't over 3.5 million (it is about 1 million now) then there wasn't a tax on the estate by the govt. but there was by the state under the inheritance tax regarding the property (and in some areas of teh marcellus that acreage with royalties could be at a higher value than years ago).     So a word of wisdom...talk with a tax accountant or an estate planner to get advice about such.    Could be a substantial amount for the heirs to pay and even perhaps they wouldn't have the cash flow to pay it...and it would be wise if you do care about your children or their children, etc.

http://www.irs.gov/pub/irs-soi/ninetyestate.pdf  (there is a table that references the amounts by year and up to 2011 on the table listed.   As the land value in those areas increases and the tax exemption amounts decrease ...it could be a substantial difference in how to afford paying those taxes...so a good time to ask is now.

AGain, it doesn't make sense to have to pay taxes again on the same bonus monies that you or others like you are paying taxes on already.    Even though some didn't like Bush that much...it was his administration that pushed for no estate taxes....in fact in 2010 there was unlimited exemption.

Permalink Reply by CATHIE on May 11, 2012 at 12:05am

Thank you so much for the information!

Permalink Reply by Steven Kacerski on May 11, 2012 at 2:58am

USA - You raise a great point about estate tax planning.  I'm sure most of us haven't had to think about this since our estates were probably under the exemption level.  Now, with the bonus checks and hopefully down the road, royalties, this will put more people over the estate exemption limit, whatever, the amount will be.  For 2012 is $5.12 million, but will revert back to $1 million in 2013 if the Bush tax cuts are not extended. 

The other issue is how will the land be valued?  At the date of death, all property must be valued and included in one's estate, regardless of whether it is held jointly or individually.  In the past, one could come up with a reasonable value for a piece of farmland.  However, what is the true value of that land with a utica well on it?  A piece of land that may be worth $3000 an acre for farm use, may be worth $10,000 an acre when you factor in the value from the oil & gas income the land is producing.  Obviously, as the taxpayer, you want the lowest value possible to minimize any estate taxes whereas, the IRS would probably argue for the higher value. 

Now is a great opportunity to review one's estate plan, including having wills in place or updated, and take advantage of different planning options to minimize estate taxes and help preserve your wealth for future generations.

Permalink Reply by CATHIE on May 14, 2012 at 12:36pm

TAXES PAID IN FULL !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

3uq96odaochmjPermalink Reply by 3uq96odaochmj on May 15, 2012 at 2:49am

now you're a "1% 'er"..............pay your tax and quit yur bitch'n!

Permalink Reply by Billy Park Whyde on May 15, 2012 at 3:10am

I sure as H am not a 1% but ya know what even if I was a .005%er I would still raise H when government employees use the taxes I pay for personal recreation or flat out waste!

Permalink Reply by frank speaker on May 17, 2012 at 3:24am

Instead of just bitching (which I also do plenty) maybe a smart way to get money back would be to write to the various government representatives on how you would like to see your tax dollars spent on things this area needs. The 18 judge court which oversees the MWCD meets on June 2nd for their only annual meeting. How would you like them to spend the over 100 million dollar windfall the conservancy district will receive? One of their obligations is to recreation -fishing boating bike trails etc. Another is to preventing erosion - as in the entire town of Zoar being wiped out for lack of funding/desire to repair the levy protecting the town. Give them your input, after all it is OUR government.

Permalink Reply by M. Ros on May 15, 2012 at 3:35am

 

Great you got our bonus money. Should I be concerned that I'm still on wait for a Chesapeake lease deal?

We went to sign up and I'm keeping hopefull despite all the news and articles I've read in past 2 weeks. I'm so gratefull for this opportunity of cash. The entire region will benefit.

 

 

Permalink Reply by John Socie on May 18, 2012 at 12:01am

when was your signing date and was it with Shell???

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