Understanding Inherited Mineral Rights Before You Sell Them!

It is important to understand mineral rights if you have inherited them and how they can benefit you. Mineral rights are the rights to minerals, oil, and gas under a property's surface. Mineral rights allow a property owner to explore, extract, and sell the minerals beneath the surface of a property.

When you sell mineral rights, you can save a fortune in taxes if you have inherited mineral rights. When you sell mineral rights, you pay substantially less in taxes because of the step-up basis you get from inherited mineral rights.

How Does a Step-Up Basis Work?

An inherited asset's value increases after the death of the original owner as a result of a step-up basis. Inheritance assets, including mineral rights, are generally valued at fair market value upon death of the original owner. As a result, when you inherit mineral rights, their value is increased to the fair market value at the death of the original owner.

If, for example, your great-grandfather bought mineral rights for $10,000 in 1950, the fair market value of those mineral rights was $100,000 when he passed away in 1980. It is $100,000, not $10,000, that would be your step-up basis if you inherited those mineral rights today.

What is the Impact of a Step-up Basis on Taxes When Selling Mineral Rights?

On the difference between your sales price and your step-up basis, you will owe capital gains taxes when you sell mineral rights. Imagine you inherited mineral rights worth $100,000 and sold them for $200,000. Your capital gain would be $100,000 ($200,000 - $100,000), and you would owe taxes on it.

When selling mineral rights, you can save a significant amount of money in taxes by taking advantage of the step-up basis.

Mineral Rights: How to Sell

The first thing to remember when selling inherited mineral rights is to determine their value. You can do this by hiring a professional appraiser or by using an online mineral rights valuation tool.

After you've established what your mineral rights are worth, you can start looking for buyers. There are many companies and individuals who are interested in buying mineral rights, so it's important to find a reputable buyer.

A mineral rights attorney can help you navigate the legal and tax implications of selling mineral rights.

Conclusion

Taking advantage of the step-up basis can help you save a significant amount of money on taxes when selling mineral rights. Inherited mineral rights can be a valuable asset, and understanding how they can benefit you is important. Considering selling your mineral rights? Do your research, determine their value, and work with experienced professionals to ensure a successful sale.
Location: United States

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