Mineral Rights Lease

My wife received a payment for a lease to some mineral rights that she owned on a farm owned by her father and long since sold. Where do I report this? BTW, I find TurboTax not helpful.

Reply to
Jim T.
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Most likely, Schedule C (NOT Schedules E or F, but maybe Form 4835). The reason is the depletion deduction.

However, are you certain that it's her income? It might be in error and belong to the current owner of the property.

Reply to
D. Stussy

Schedule E for Royalties and Rent. Since it's just a siingle item it could go on 1040 line 22 but when Royalties start it;s E. ed

Reply to
ed

On 3/24/2012 8:10 PM, D. Stussy wrote: ...

Likely the ground was sold but retained mineral rights. _Very_ common in areas where there is or is foreseen to be oil/gas production.

Reply to
dpb

However, are you certain that it's her income? It might be in error and belong to the current owner of the property.

Likely the ground was sold but retained mineral rights. _Very_ common in areas where there is or is foreseen to be oil/gas production. ~~~~~~~~~~~~~~~ It may be rent --or it may be royalty or working interest. If it a payment based on production, put it on Sch C if it is a working interest and put it on Schedule E if it is a royalty interest--take 15% depletion in either cas.

If it is NOT based on a share of production, it is Rental Income and would go on Schedule E as RENT and no depletion would be allowable.

Reply to
X

On 3/25/2012 12:09 PM, dpb wrote: ...

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I'd add that if this is new activity on an old lease or a new lease and haven't paid much attention to what's going on in the area owing to the ground having been sold some time ago it may pay to dig into it in some depth. A few leases in some new areas around here have gone as high as $3000/A on initial lease and there have been some sizable new discoveries that are pulling in big royalties where a seemingly small difference in the royalty rate if there is a producing well developed can make very large difference in subsequent royalties. There is potentially some serious bucks at stake...

Reply to
dpb

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