tranfer of mineral rights

[dagshop]

I obtained mineral rights in 2021 from a corporate liquidation. (I had to pay tax on the $8,500 value as a liquidation distribution.) However, under terms of a prior land sale by the corporation, the rights had to be transferred to the current land owner in 2025. Can I take a capital loss for transfer of the rights for an amount of $0? The cost basis, I believe, would be 8500 less the percentage depletion taken in the years I owned the rights. If so, can the loss be reported on form 8949, or is form 4797 required?

[DianeW777 · Accepted solution]

Yes, you would reduce your cost by the depletion deductions taken in each earlier year. 

Reporting is dependent on your position.  If you held this as an investment property and not a business then it would be an investment sale reported on Schedule D, which is most common. 

If you actually held this property for business purposes then it would be reported on Form 4797.

Schedule D: To enter your sale in TurboTax, follow these steps. 

1. Open or continue your return.
2. Navigate to the investment sales section:
   • TurboTax Online/Mobile: Go to investment sales. If using this application, make sure it is open
   • TurboTax Desktop: Search for investment sales and then select the Jump to link.
     • Or Personal Tab > Continue > I'll choose what I work on > Scroll to Investment Income > Select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other
3. Answer Yes to the question Did you sell any of these investments in 2025? 
   • If you land on  the Investment sales summary or Your investments and savings screen, select Add More Sales or Add investments.
   • Click this link for more information. Where do I enter Investment Sales?

Form 4797: Sale of Business Property:

1. Income and Expenses at the top
2. Scroll down to Other Business Situations
   • For TurboTax Desktop: Business Income and Expenses > Less Common Business Situations
3. Select Sale of Business Property
4. Select Sales of business or rental property that you haven't already reported.
5. Answer 'Yes' to Do all of the following apply...?
6. Enter your sales information:
   1. Description of the Property (Machine Type)
   2. Sales Price/Sales Expenses 
   3. Date acquired and date sold
   4. Cost
   5. Depreciation/Depletion