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smithda2
New Member

Can I claim 1099 Misc Box 3 income (OK Unclaimed Funds) as Royalty? The source was mineral rights bonus that should have come directly to me had a will been probated.

My aunt's will was not probated until I discovered the error 14 years after her death. In the will I inherited mineral rights in Oklahoma. During this time period, a pooling agreement paid a bonus, but the money ended up with the unclaimed funds department as they could not find the owner. The money went through the OCC who forwarded it the state treasurer's office (after taking a 10% fee). it cost me another 20% of the total in attorney and misc. fees to eventually receive the payment in 2016.

I received a 1099 Misc form from Oklahoma, showing the gross amount of the money they paid me in Box 3. All other boxes are blank. Can I claim the money as Royalty (Box 2) and deduct the cost and lost income noted above?

When I entered the 1099 in TurboTax Deluxe 2016, the tax refund counter at the top of the page dropped significantly. I calculated that I will have to pay almost 25% on the money I received, which seems excessive.

I realize if this is claimed as Royalty, then I will have to pay Oklahoma state tax also (I am, a resident of Missouri). I am trying to minimize my tax obligation, but not sure what if any options I have or which to chose if I do.

Thanks for your help,

Dave [removed]

1 Reply
PatriciaV
Expert Alumni

Can I claim 1099 Misc Box 3 income (OK Unclaimed Funds) as Royalty? The source was mineral rights bonus that should have come directly to me had a will been probated.

Unfortunately, income reported in Box 3 is not Royalty Income. Mineral bonuses are one-time income. For this reason, you would enter this Form 1099-MISC under:

  1. Federal Taxes
  2. Wages & Income
  3. 1099-MISC and Other Common Income
  4. Income from Form 1099-MISC

When asked, check that this income was NOT related to a main job. Likewise, check that you received it only this year. Check that it didn't involve an intent to earn money.

This entry will result in your description and the amount in Box 3 appearing on Form 1040 Line 21 "Other Income." No Schedule E will be created.

Your legal expenses, since they relate to recovering taxable income, may be reported as Itemized Deductions on Schedule A.

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