My friend sold an Inherited land with royalty rights located in Oklahoma; I am a resident of Texas.

[IllesFarmer]

Before my friend sold this land, he received a 1099misc royalty incomes. Does he need to file 511NR and 561 form to claim state taxes withdraw refund? and capital gain? he received a cashier check, is that his sale price? or proceed? 

[JamesG1]

It sounds like the IRS form 1099-MISC was royalty income.  Oklahoma will claim that income and tax it.  Whether those are the forms used or not, it is hard to say without seeing his tax return information.

If he received a cashier check, that may very well be the sales price.  Is there not a sales summary or contract or sales invoice that reflects all of the incomes and expenses?

Withdraw refund and capital gain, it is possible but it is hard to say without seeing the tax return information.

Per IRS Publication 551 (page 15), the cost basis of property inherited from a decedent is generally one of the following:

1. The fair market value (FMV) of the property at the date of the individual's death.
2. The fair market value (FMV) on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. 
3. The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. 
4. The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement.

[IllesFarmer]

Thank you for your help. I am helping my friend with his taxes. He received two 1099misc--royalty incomes. one had withdrawn state taxes. I got his appraisal value on the date he inherited the property. Only gave me that cashier check with the amount of money he received. So I need to ask him for sale agreement? or do you think that cashier check he received already deducted all expenses? I can use it as a sale price for capital gain forms for Sch.D and 561Form?

[JamesG1 · Accepted solution]

You are welcome.

It is possible that the cashier check is a 'net' amount, that is why I wondered about the sales agreement, if one even exists.  Either the sales agreement or the cashier check amount will be used to report sales Proceeds on the sale of the property on Schedule D and the Oklahoma tax return.

You are saying that one of the IRS form 1099-MISC reports income tax withheld in box 4.  Make sure that he is given credit these taxes.

[IllesFarmer]

another question: depletion. I read his 1099 misc again. Found the companies which issued 1099 miscs sound like energy companies. I guess probably oil or gas companies. So I need to fill out depletion forms,right? use 15% of royalty incomes?

[PatriciaV]

TurboTax automatically calculates percentage depletion for mineral rights income entered for Royalty Properties.

Additional Information: How do I enter a 1099-MISC for royalty income?