Are any legal or professional costs incurred during the negotiation of the lease and lease bonus tax deductible?
If you are negotiating directly with the company, then no professional costs. The lease bonus is income. My accountant does take a 22% depletion on it, but check with yours. If the lease is not drilled in three years (or the term of the lease), we have to pay it back.
Thank you for your reply. I am wondering about the commission paid to the land man on my behalf.
You would have to ask your accountant.
If you pay direct legal expenses for review of the form by your own attorney or expenses for your own landman, then you can deduct those expenses against the income. Generally the lease bonus can be reported on Sch E and the costs deducted there. For federal taxes, there is no depletion on the bonus. For state income tax, it will depend on your state law. Consult your accountant.
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Thank you for the information.
Thank you for your reply.