I have something I've not seen before. I have a 1099 (box 3) my client says it's for a gas well on property they own the mineral rights for but not the land. Do I report this as other income or should it go on a Sch E? If it does indeed go on a Sch E how do I go about finding the depletion rate?
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It will go on Sch E with 15% depeletion. -
The 15% is taken off the gross.Comment
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Thank You
I don't see a lot of this kind of thing here in the city.Comment
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Depletion? Maybe, maybe not
Unless there is production, there would be no depletion. Oil & Gas companies pay a rental fee for the "right" to drill which would be rent, not royalty.
If there is production there would be statements showing how many MCF of gas were produced along with any deductions for compressing the gas and for gathering lines to get it to the sales meter. If it is a round figure, it is probably rent.Comment
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The taxpayer that owns the min. rights get the income from the well but the land owner gets the land lease money.As posted the client retained the min. rights so the only income would come from well production. In LA we have had a lot of this due to the Haynesville Shale. Many of the land owner got the land lease money but when production starts they won't receive any money as the prior owners retained the min. rights.Comment
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