Mineral Interest Sales

There are plenty of advertisements and marketing materials out there asking you to “Sell your Minerals”.  The offers of “Cash Now”, “reduce your risks” and “you can pay lower taxes by selling than receiving royalties” or similar marketing gimmicks can be very enticing. Have you received solicitations from companies offering to buy your minerals? The buyers usually know something that you do not know, which may indicate that there will be drilling activity in your area soon. We have had a couple of clients sell their minerals and a few months later, a well was being drilled under their property, and they missed out on royalty payments.

Your mineral asset is exactly that, an asset. This asset can be sold and can be sold in different ways. If you sell your mineral completely, you are making a multi-generational decision.  Sale of minerals is a decision that will affect your asset and income wealth for years to come.  Please educate yourself properly before making this decision and remember who the advice you are receiving is coming from. Do they stand to benefit from your sale in any way?  Look for advice from someone who is neutral or not standing to benefit – this is where you get contrary and usually good advice.  Make sure you are making a well informed decision.

The sale of mineral interests is a taxable transaction for the seller. Please educate yourself before you sell by contacting your CPA so you can make an informed decision. With the help of your CPA you can incorporate tax planning into this decision before you sell.  Know your tax consequences and costs before you make a decision.

Do you want to reinvest in other property with the proceeds?  If so, you should understand the benefits and procedures for performing a 1031 Exchange.

Always seek legal advice from a knowledgeable and qualified attorney when negotiating and signing legal agreements. It is recommended that legal counsel and the CPA coordinate their efforts from the inception of negotiations to ensure the deal takes advantage of any possible tax deferral strategies.