Inherited approx 10 acres min rights in Eddy County in 2001. How would I figure out cost basis or value of those rights at the time?
If an estate tax return was filed, look to see what value was claimed. Remember that the 2001 basis must be reduced by all depletion that you have claimed on your tax returns down to, but not below, zero. It is common that accumulated depletion deductions over two decades for producing minerals will reduce the basis to zero.
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Drill rights have been leased, off and on, but no drilling yet. Would it be legit to use percent growth in crude oil prices as measure of change in mineral rights value since inheritance to set capital gains tax calculation on sale of mineral rights?
My experience is that nonproducing minerals in areas without much drilling did not have significant value at that time. It is not simply a function of oil prices, but the more recent innovation of horizontal drilling and large investments by wall street to fund new companies to explore these areas. Perhaps someone can suggest an appraiser who was active at that in Eddy County to help you. Be sure to research recent permits or drilling on or around your minerals to see if your offers are due to anticipation of royalties.
The simple answer is that nobody in any Federal capacity is qualified to come up with any competing answer for this. The true answer is going to be that they were worth near zero in 2001, but IMO you can do whatever you want within reason. Didn’t hear that from me. I’m sure that’s not the right way to run it, but it’s not realistic to expect a seller to be able to figure out the right way to run it.
I would think the bigger question would be, how good/bad of a deal did/could you get on selling them today?
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