Is the sale of my gas and oil minerals taxable as capital gains, like timber is?

Is the sale of my minerals gas/oil royalties taxable as capital gains?  I am not talking about leasing, but the sale of those minerals.  I already know that the sale of timber is taxed as capital gains, and the money from royalties on a gas/oil well lease is taxed as rental or ordinary income.

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0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on March 6, 2013 at 3:48am

Tad, 

The directions for Capitol Gains did not address mineral rights sales directly but the Tax Code may contain more details, I believe it is written in Latin, you know why.

I did see an add in the Oil & Gas Magazine by a company that buys minerals from landowners which states: "Eligible for Current Capital Gains Tax Rate". 

I don't beleive he will kiss you during the process of buying your minerals, but he might smoke a cigarette after you sign the paperwork. 

See Jeff Rokisky, WV Attorney if you insist on selling your minerals. He ensures that you get the most competitive rate based on the way he estimates the value of your minerals and uses 25 or more companies to compete for your minerals.

Permalink Reply by brat on March 6, 2013 at 4:10am

Ron,  Yes , so far everyone on here seems to agree that selling minerals is taxed as cap gains.

 

Any idea what this Jeff Rokisky gets for a commission or payment percentage of sale?

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on March 6, 2013 at 11:53am

Tad,  I've seen Jeff's half hour show on topic, he is on Channel 9 Stuebenville on Sunday after Meet The Press (10:30 am) . The show on the topic of mineral sales is rerun a few times a month.

The rate I remember is 6% of the total amouont they can get for you, but as one of the attornies made a point of, what they can get for you is significantly more than what a landowner can get by himself. They had an example where a landowner decided to sign on his own and what he got from the same company that their client got in a similar location was on the order of a huge differencet. No numbers were given though. 

Jeff has a website with all the information you need. Do a Search using Jeff Rokisky WV Attorney and his site should show  up.

If I was in a tight spot I would use Jeff if I was going to sell my minerals. Otherwise I don't recommend selling mineral rights. It's your fortune, why give it away?

Permalink Reply by brat on March 6, 2013 at 12:00pm

Thanks Ron, Think I'll also talk with Nathan Vaughn from Krugliak (sp).  I know he is an excellant oil/gas attorney ...maybe see what he advises.

Permalink Reply by Mark Duncan on March 7, 2013 at 11:43am

I just spoke to our tax guy about this. It seems to work out around 17-18% in federal capital gains for us. add another 5% for the state of ohio. He did add spreading payment over a couple years would help if the company was willing to do so. Not sure what we will do but was wondering the same thing.

Permalink Reply by D Thomas on March 7, 2013 at 12:14pm

Ask anyone associated with the oil and gas industry.. they'll probably tell you it's not a good idea to Sell Mineral Rights.

However they will tell you..{ as they've told me half a dozen times when I asked half a dozen executives from every major oil company local to Ohio and Belmont County.... "never sell mineral rights.. LEASE them.

ps-it appears the deal with Ohio Valley Royalties Group is doing poorly.. so glad to see people aren't as dumb and desperate as it first appeared. How do I know this? ...because they've already postponed their signing.. apparently due to Lack of Interest.

Why Sell Mineral Rights when you can Lease them!

Permalink Reply by brat on March 7, 2013 at 2:07pm

D Thomas ,,,you can't lease them if you're HBP.

Permalink Reply by jonathan M. on March 7, 2013 at 2:15pm
Tad,

You're right about that! I have some hbp minerals in western guernsey that I sold a portion of. If it is not a good idea to sell mineral rights then why do oil and gas companies buy and sell them everyday? Not everyone's minerals will prove to be a gold mine...
Permalink Reply by Shannon McNulty, J.D., LL.M. on March 13, 2013 at 5:10am

Whether the sale of mineral rights is taxed as capital gain or ordinary income depends on the structure of the lease, but generally it will be taxed as capital gain.  In 2013, you can be looking at a capital gains rate of 23.8% if you fall into the highest tax bracket.  However, if there is a fixed payment in the lease, e.g., a bonus payment that hasn't yet been paid, that portion will be taxed as ordinary income at a rate as high as 43.4%.  If you're land is located in Pennsylvania, the amount of the sale proceeds will also be subject to the realty transfer tax, generally 2%.

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