Last year I sold some of my mineral interests, they are located in Texas and I live in Texas. I called the company I sold them to because I had not received a 1099. I was told that they would not be sending one and that they were not required to do so. Is that correct? I found this article: If you sell your mineral rights or oil & gas royalties, the IRS indicates that the sale can be treated one of two ways: Your sale could be treated as the sale of business property which would be reportable as a section 1231 gain or loss reportable on form 4797. Depending on how the property is held, the income or loss from the sale may be reportable as a capital gain or loss on Schedule D. What does it mean “how the property is held”? The deed is in my name as an individual. What is the deciding factor on how it is reported?
Not a tax authority so travel at your own risk here.
To me, “how the property (mineral interest) is held” means, is it owned by a business…corporation, LLC etc. that is engaged in the business of buying mineral interests in which case it would be a Section 1231 transaction…or is it owned by an individual. It sounds like you will be going the Schedule D route.
The next question usually is, what is my cost basis in that mineral interest that I’ll need to know in order to calculate my gain or loss on the sale. That will depend on how you acquired the interest.
If you bought it, unless there was something unusual, your basis would be what you paid for it plus any cost of acquiring or selling it. But the more common situation is that the interest was received by inheritance or gift, or that it was purchased along with the surface interest in the land and the surface and minerals are now being separated. Depending how you acquired that interest, and the amount of money involved, the correct reporting would be logical to discuss with a CPA or tax specialist.
They are not required to send 1099s on the divestiture of assets.
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