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I bought mineral rights late 2017. I did not have expenses beyond the purchase price and no income from it so far. No taxes for it in 2017. Is purchase price deductible?

oldtaxmank — Thu, 06 Jun 2019 14:04:05 GMT

I do not want to miss out on future deductions by not listing the cost now.

No - The cost of your mineral rights is the cost basis in...

DS30 — Thu, 06 Jun 2019 14:04:06 GMT

No - The cost of your mineral rights is the cost basis in this capital asset. So when you sell it, you will deduct this cost basis from the sales price.

The IRS allows you to claim an additional write-off every year, called depletion, to compensate you for this. The depletion allowance varies, depending on the type of mineral and the method you choose

So, if I never sell the mineral rights, I do not get any...

oldtaxmank — Thu, 06 Jun 2019 14:04:08 GMT

So, if I never sell the mineral rights, I do not get any tax benefit on the cost? I would at least think income from it would be used to offset the investment before any profit was realized?

I updated my answer. I should have included that you are...

DS30 — Thu, 06 Jun 2019 14:04:10 GMT

I updated my answer. I should have included that you are allowed a depletion expense ever year. This is how you get to expense your original cost. Also you can deduct your severance taxes (if any) and you can deduct any additional expenses that get passed through to you, such as transportation or processing charges

Thanks

oldtaxmank — Thu, 06 Jun 2019 14:04:11 GMT

Thanks

Good luck - I hope you hit the jackpot :)

DS30 — Thu, 06 Jun 2019 14:04:13 GMT

Good luck - I hope you hit the jackpot 🙂