Retrospective Mineral Appraisal (Capital Gains)
Petroleum Evaluations Group's experts provide retrospective mineral rights appraisals for long-term capital gains purposes.
Retrospective Mineral Appraisals
If you own mineral rights, there is a good chance you inherited them from your family. If you then sell your mineral rights, you will have to pay long-term capital gains tax.
The capital gains tax is based on the increase in value of the mineral rights between the date of inheritance and the date of sale. The federal capital gains tax rate is typically either 15% or 20%. You should also be aware that some states assess their own capital gains tax in addition to the federal tax.
Capital Gains Tax Example:
Julie inherited mineral rights in 2010. The value of her inherited mineral rights was $100,000. She then sold the mineral rights for $300,000 in 2020. She now has to pay 15% long term capital gains tax on the $200,000 the mineral rights gained in value. She owes the IRS $30,000 in taxes.
Most mineral owners do not know what their mineral rights were worth when they inherited them.Petroleum Evaluations Group can conduct a retrospective appraisal to establish the "basis" for long term capital gains tax. A retrospective appraisal may be able to save you a lot of money that you would otherwise have to pay in taxes.
How do we Determine the Value of Your Mineral Rights?
Our team of geologists and engineers forecast future hydrocarbon production on your properties and the commodity prices for oil, gas, condensate, and natural gas liquids. This takes into account wells that are likely to be drilled in the future. Production and price data is entered into our proprietary economic modeling software that calculates the net present value of future royalty revenue. The result is a final dollar per acre opinion of value for your mineral rights. In the appraisal world, this is referred to as the “income approach”. We also consider comparable sales of mineral rights near your property, however, when valuing mineral rights this approach is often not as accurate as the income approach.