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Permalink Reply by Philip Brutz on January 12, 2015 at 8:29am

Before you sell part of your mineral rights and become partners with a stranger, make sure that you understand how they could force you to sell them the remainder of your mineral rights using a legal "Partition"  

http://en.wikipedia.org/wiki/Partition_%28law%29

 

"A partition is a term used in the law of real property to describe an act, by a court order or otherwise, to divide up aconcurrent estate into separate portions representing the proportionate interests of the tenants. Under the common law, any tenant who owns an undivided concurrent interest in land can seek such a division. In some cases, the parties agree to a specific division of the land; if they are unable to do so, the court will determine an appropriate division. A sole owner, or several owners, of a piece of land may partition its/their land by entering a Deed poll (sometimes referred to as "carving out").

There are three kinds of partition which can be awarded by court: partition in kind, partition by allotment, and partition by sale. A partition in kind is a division of the property itself among the co-owners. Partition in kind is a default method of property partition.[1] In a partition by allotment, which is not available in all jurisdictions, the court awards full ownership of the land to a single owner or subset of owners, and orders them to pay the person or persons divested of ownership for the interest awarded. Partition by sale constitutes a forced sale of the land, followed by division of the profits thus realized among the tenants. Generally, the court is supposed to order a partition sale only if the land cannot be physically divided, although this determination often rests on whether the economic value of the divided pieces is less in the aggregate than the value of the parcel as a single piece. See Delfino v. Vealencis, 436 A.2d 27 (Conn. 1980).

A provision in a deed completely prohibiting partition will not be given effect, but courts will enforce a provision that temporarily restricts partition, as long as the restriction is reasonable."

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Permalink Reply by Booger on January 12, 2015 at 9:54am

I've read that before and I suppose you are maybe saying it is best to split the parcel first.....so they can't force you to sell the rights on the other parcel.

by the way - I meant 1031 (vs 1033) on the state tax thing.

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Permalink Reply by evan on January 12, 2015 at 12:35pm

I'm sure I have this part right but don't quote me on it. If you sell mineral rights for say 400,000 and you find a property you want to buy for 300,000 you will just pay C Gains on the remaining 100,000. I think you have 45 days after the sale to locate a potential property and another 3 or 4 months to close on it. Those dates are close but may not be exactly right. On the selling royalties part of your question. That's something I about did but backed out. It was a little less money but not much and I felt a lot safer bet in the long run

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Permalink Reply by Robert Bond on January 12, 2015 at 1:17pm

To do a 1031 exchange you will need an agent such as an attorney or title company that does this kind of work.  They will receive the funds and actually  purchase the new property for you.  If you touch the money you can not do a 1031 exchange.  The Internal Revenue Service has rules that must be followed very closely or the will disallow the transaction.   There are time limits to identify the property and deadlines for the closing.  Contact a knowledgeable professional agency to handle this for you.

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Permalink Reply by Booger on January 13, 2015 at 3:18am

thanks Robert and evan.........I did read up on it and you are both right........I am still wondering how the state of ohio will tax the capital gain if you 1031.....cant seem to find that answer.

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Permalink Reply by Alan Bowers on January 13, 2015 at 5:01pm

Provided that the proceeds from the 1031 are treated as Capital Gains, the proceeds are factored into your Adjusted Gross Income on your Federal Tax Return. There is a line on the first page of a 1040 form where you list your Capital Gains and the line is used in calculating your Adjusted Gross Income. The state of Ohio, on returns through 2013 tax year, starts out their return by taking your Adjusted Gross Income from your Federal Tax Return.  Haven't seen a 2014 Tax Year form for Ohio yet so I can not speak specifically to that form yet but if the pattern holds true it will more than likely be the same for 2014. 

By taking your Adjusted Gross Income from your Federal Tax Return the Capital Gain is already factored into your income that the State of Ohio plans to tax.

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Permalink Reply by searcherone on January 12, 2015 at 1:48pm

Look at Philip's post closely;  when you own property jointly with anyone you can be forced into a partition sale by one of the people or in this case companies involved;   also once you sell a percentage that new owner may sell to someone else who sells to someone, etc.   Having owned property jointly with several people IMHO it is best not to.

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Permalink Reply by Booger on January 13, 2015 at 3:15am

searcher - thanks, that's what I was thinking..........so the question is - if I wanted to sell half of the mineral rights, it would be best to split the parcel into two separate parcels - then sell the minerals on one of the parcels......then there would be no worry about being forced into partition.

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Permalink Reply by searcherone on January 13, 2015 at 3:28am

Yes, in my opinion separating would be better;  my property is in four parcels, if I were thinking about selling I would do so only on one parcel and then it would be the parcel that I least cared about what could or might happen on the surface if the new owner wanted to extract the minerals;  look at WV where many landowners own only the surface, many surface owners have been treated poorly and adversely affected by the o/g boom;  the mineral owner has the right to their property and once you don't control that your surface can be impacted;    also personally I would only sell o/g and keep the other minerals.   Also once the minerals are sold many people myself included would not be interested in your surface acreage.    And most definitely contact a lawyer, preferably an older experienced one who has seen a lot of different situations.   Just my opinions.   

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Permalink Reply by Philip Brutz on January 13, 2015 at 4:20am

West Virginia Surface Owners' Rights Organization

http://www.wvsoro.org/

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Permalink Reply by wandering juju on January 15, 2015 at 3:40am

 It is hard to trust any large corporation, land man or just some company that recently popped up in the play without any knowledge on who they are..  I have been working with one of the better companies for the last 2 yrs..  have dealt with most of the real companies and lawyers out there...  I can tell you by selling 50% of your minerals to this company that you gain not only funds up front but also back room negotiations that your lawyer and you have no idea on how to get info on or postioning at all..   to many this may sound like another run on your acreage but to those who wish to discuss further..  I can divulge more info..    feel free to contact..  not much of a reason to put name out there..   is too disgusting what people say without any information to back it..  

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