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
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 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 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