I am not very familiar with the like-kind exchange rules. I thought that if you sold assets for a profit, but reinvested the proceeds in a like-kind asset, you got to defer the gain until the replacement asset was sold. Contango's second quarter results included a giant gain $100m+) for the sale of the Western Core Fayetteville assets, which proceeds were reinvested on January 4 when the company closed on its acquisition of additonal Dutch and Mary Rose interests.
Will the January 4 acquisition result in the second quarter gains being "re-stated" or adjusted downward in the next quarter financials to wipe off this gain, or how does this work? Any input is appreciated. Thanks.
No, gains on producing oil/gas properties are not taxable if rolled into another producing property within the allowable time frame (90 days, I think?). Doesn't have anything to do with the cash that's received. This is a special ruling from the IRS similar to a real estate 1031 transaction.
As for the question in the other posting...the gains don't have to be restated - they are what they are - gains. They are set in stone. The only thing not set in stone is whether they are taxable or not. If reinvested in a 1031 exchange, then not taxable. This is my understanding from studying the issue for the past couple months, since Contango first announced the 1031 exchange in Nov or Dec.