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Sabine Royalty Trust Message Board

  • kruzeman kruzeman Mar 7, 2008 4:34 PM Flag

    Interest Income Reported On 1099

    For the first time ever my broker reported royalty income net of interest income earned by the trust and issued a 1099-INT for that amount. Then reported the net royalty income on 1099-MISC. Has anyone ever had this happen. In the past I have ignored the breakdown of gross royalty income less expenses per the tax booklet and just reported royalty income received on schedule E.

    Seems a bit silly since I understand that both royalty income and interest are taxed at the marginal tax rate of the taxpayer.

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    • I believe the 'Royaly income" is tax deferred
      until you sell, at which time you must adjust the purchase price by the amount of income recieved.
      I have never heard of trust 'distributions' being called income!
      The trusts send me some forms to fill at tax time to determine what is what.
      I am more familiar with Canadian Trusts---they call the money Distributions, never dividends or interest.
      Hope this does not confuse you more! I haven't messed with US Trusts again till just last week. I prefer to TRADE THEM as they rise about 4X the distribution amount 7-10 days before 'x' day, and then drop about 4X times the distribution after Holder of Record day.
      In the case of SBR recently, similar action took place, and I made 3.5X the Distr. than if I had held the stock and taken the Distr.
      Since it pays monthly, you have 12 times per year to play the game.
      Here is the proof--works about 10 months out of 12.
      This is a great chart site, as it shows what happens before X-day and afterwards.
      On SBR in the last 2 weeks I made 3.5 x the .42 cent Distribution. Multiply the % rate by the 3.5 and it is very meaningful.I DO NOT WANT THE DIVIDEND--I WANT THE CAP.GAINS.Many of US Trusts and Canadian royalty trusts have different X-days ,so if you jump around you can make possibly 24-30 trades per year!!
      Study the chart--it tells the story.
      Canada takes 15% W/H, but you get a direct credit for the whole amount on your US taxes--nothing lost.
      I have very low commisions with www.interactive brokers .com 200 shares at any price for $1.00--that's 1/2 penny in and another 1/2 penny out--insignificant. Plus I can afford to accumulate/sell in smaller increments.They have a $12. /MO. MINIMUM CHARGE.
      So I basically consider any trust to be a STRONG BUY after it has fallen 3 to 5 times the amount of the dividend, and a STRONG SELL after I have a cap gain OF AT LEAST 3x JUST BEFORE X-DAY .

      • 1 Reply to leejeane
      • Royalty income is tax deferred to the extent of depletion claimed. Upon sale, all depletion claimed is recaptured as ordinary income. Usually the interest is miniscule (usually around a $1 for every $1000 of distribution).

        In your strategy, aren't all your cap gains short term and taxed as ordinary income?

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