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oldtaxmank
New Member

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?

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

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Accepted Solutions
DS30
New Member

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?

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 

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5 Replies
DS30
New Member

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?

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 

oldtaxmank
New Member

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?

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?
DS30
New Member

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?

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
oldtaxmank
New Member

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?

Thanks
DS30
New Member

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?

Good luck - I hope you hit the jackpot 🙂
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