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BP Prudhoe Bay Royalty Trust Message Board

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  • costbasistools costbasistools Jan 12, 2010 10:55 PM Flag

    tax question

    Depletion deductions are subject to recapture as ordinary income (not capital gain) when the property is sold at a gain. Internal Revenue Code Section 1254.

    For further information, see www(dot)costbasis(dot)com(slash)otherassettypes(slash)royaltytrusts(dot)html

    Sorry for the dots and slashes but Yahoo kicks it out if it is a link.

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    • As far as depletion goes and bothering with the tax effort, the IRS says, "deducted or deductable," i.e., if you don't bother to claim the deduction, you will still have to add it back at sale--and you won't have gotten the benefit. If you own a royalty trust in a taxable account, do your taxes properly. TurboTax will handle it as long as you input the information.

 
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