There are quite a lot of factors that come into play when determining how valuable minerals under a piece of property can be. They can more than likely be of great value to the owner if:

• The minerals are already leased

• The minerals are producing

• There is quite a bit of leasing or drilling activity taking place in the area where your minerals are located

Conversely, if your minerals are unleased, or there is not a lot of leasing or drilling activity in the area where your minerals are located, or if they’re not producing, then perhaps they are not worth all that much.

But don’t be discouraged if your minerals fall into the latter categories, activity is always moving and spreading and can change very quickly from one area to the next. A Mineral Appraisal is the best place to start to know the value of your newly inherited asset and can even help save you potential capital gains tax headaches.

The good news is that you cannot lose or misplace mineral rights. Once owned they are owned forever until one gifts, sells, or passes them down through inheritance.  If one forgets what they own a little bit of research by an experienced Landman could go a long way.  A check of the courthouse records or the online county tax roll could clear this up in a jiffy.

If you own minerals and/or royalties and they are NOT producing yet, you will NOT owe any taxes on those rights until they get put to use, or become producing.

If you’re interested in buying and selling minerals and royalties, capital gains taxes are taxes placed on various assets based on length of ownership and the year in which they are sold. If you do not get an appraised baseline value upon based on the time and date of the inheritance, you risk significant tax implications if/when you decide to sell.

Long-term capital gains taxes are placed on assets sold after having been owned for longer than one year.  The federal long-term capital gains tax rate is typically between 15-20%, however, some state’s have their own capital gains tax rate in addition the the federal capital gains tax.

Take this simple example: You inherited minerals and royalties at some point in the past and let’s say they were worth $500k at the time of inheritance. A few years later, you sell them for $1mm. If you didn’t get a present mineral and/or royalty appraisal at the time of inheritance, or a retrospective mineral and/or royalty appraisal dated back to the time of inheritance, prior to selling those interests you would be taxed 15-20% capital gains tax on the full $1mm.

If you would have done one of the aforementioned appraisals, as long as you owned the assets for longer than one year (long-term capital gains), you would only be liable for the 15-20% capital gains taxes on the $500k profit ($75k @ 15%) instead of the full $1mm ($150k @ 15%). Big difference!