Loss of mineral rights

[Bottome]

I inherited 50 year old mineral rights in Ohio a few years ago. I live in Colorado. Apparently, Ohio passed a law that said mineral rights that had not been developed over a certain amount of time would be considered abandoned and given to the surface land owner. Since I did not live in Ohio there is no way I could know about this law. In addition, no one in Ohio attempted to contact me so that I could respond. Consequently, I have recently learned that I have lost these mineral rights without being afforded due process. My question is can I deduct the value of the loss of these mineral rights on my federal taxes?

[Vanessa A · Accepted solution]

Yes, this would be considered an investment property since they are inherited mineral rights and not part of your personal use property.  Since this is investment property and it was abandoned, it is treated as a disposition of property so it would be eligible for gain and loss treatment.

"Loss from abandonment of business or investment property is deductible as a loss. A loss from an abandonment of business or investment property that is not treated as a sale or exchange is generally an ordinary loss. This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned." Pub 544

If you did not receive any type of payment for the property, then the selling price would be $0.  Also, the cost basis would typically be the Fair Market Value on the date of death since this is inherited property. 

@Bottome (Edited 3/6/2025 @ 12:05PM PST)

You would enter the sale of the land by clicking the following:

1. Federal
2. Income
3. Show More next to Investment Income
4. Start next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) 
5. Select Other
6. Continue through and select land for the type of investment
7. Answer how you obtained it
8. You will need to enter the selling price, dates and the cost basis   

Note, your navigation sequence may be slightly different.  You can also use the Jump to feature by entering investment sale in the search bar at the top of the screen. 

[Bottome]

Thanks for the answer but I am confused.

What you are saying is that if I had sold my mineral rights then I would have had to pay Federal taxes on my profit but since I lost my mineral rights because they essentially were taken away from me without my knowledge by a state law that was passed in a state I do not live in and was never notified about, I have no ability to deduct the value of those lost mineral rights on my federal tax form. Is that correct?

[DaveF1006]

Yes, this is considered a deductible loss, according to Publication 544 in the section on abandonment.  Please use the steps that Vanessa A has outlined to report this loss.

[Edited 03/06/24|12:59 pm PST]

[Bottome]

Thank you. That is very helpful.

Bottome