Disposition of Depreciable Property Not Used in Trade or Business

[Bridgesh73]

I have inherited mineral rights that were sold. They report on Form 8949 but you are required to recapture depletion but using part III of form 4797. For do you do this in Turbo Tax? Link to IRS rules: https://www.irs.gov/instructions/i4797#en_US_2025_publink100038952

[DavidD66]

If you inherited the mineral rights in a prior year and have taken a tax deduction for depletion on your tax return(s), then the sale of the mineral rights would not be subject to recapture because you received a step-up in basis when you inherited them.  In this case you would only need to report the sale on Form 8949 and Schedule D.  

According to the IRS:

The basis of property inherited from a decedent is generally one of the following:

• The fair market value (FMV) of the property on the date of the decedent's death (whether or not the executor of the estate files an estate tax return.
• The FMV of the property on the alternate valuation date, but only if the executor of the estate files an estate tax return (Form 706) and elects to use the alternate valuation on that return. 

[Bridgesh73]

Yes you get stepped up basis.

But the mineral produce income and in the interceding years depletion was claim.  To my understanding you must recapture that depletion.  From the 4797 instructions:

“Disposition of Depreciable Property Not Used in

Trade or Business

Generally, gain from the sale or exchange of depreciable

property not used in a trade or business but held for

investment or for use in a not-for-profit activity is capital

gain. Generally, the gain is reported on Form 8949 and

Schedule D. However, part of the gain on the sale or

exchange of the depreciable property may have to be

recaptured as ordinary income on Form 4797. Use Part III

of Form 4797 to figure the amount of ordinary income

recapture. The recapture amount is included on line 31

(and line 13) of Form 4797. See the instructions for Part III.

If the total gain for the depreciable property is more than

the recapture amount, the excess is reported on Form

8949. On Form 8949, enter “From Form 4797” in column

(a) of Part I (if the transaction is short term) or Part II (if the

transaction is long term), and skip columns (b) and (c). In

column (d), enter the excess of the total gain over the

recapture amount. Leave columns (e) through (g) blank

and complete column (h). If you invested this gain into a

QOF and intend to elect the temporary deferral of the

gain, see the Instructions for Form 8949; Form 8997, Initial

and Annual Statement of Qualified Opportunity Fund

(QOF) Investments, and its instructions; and the

instructions for the applicable Schedule D.”