OT:Follow up on Oil Royalty checks...

[SoCalSteve]

Hi all,

For anyone who cares, I asked you guys if you knew about Oil Royalty monies and I got some great answers. That prompted me to do my due dilegence and research. What I found was yes, there is money and oil to be made from under my house. Actually, the entire neighborhood gets royalty checks from an oil rig/oil company about 2 blocks away from where I live. Who knew?

Since I have been living in this house almost 4 years now and have not gotten a single royalty check in all this time, when the letter came and said that they owed me an Ottrott and and F3 fork, I was pretty blown away!

Well, the check came today for the 1st quarter of 06' and going all the way back to the middle of 02' and yes, I could buy an Ottrott and F3 fork with it (if I already didnt have one, which I do).

So, anybody out there a CPA or tax consultant? Is there a different tax picture on oil royalties? Is it just considered regular 1099 income and will it be included with my income and taxed the same ? I guess I'm asking because I want to know how much to sock away for tax time.

The rest will go to pay off a credit card that's been used to pay for a few bikes and bike parts. It's at 0% interest. I always like to use other peoples money for as long as I can. I'm sure you all do the same.

As always, thank you all in advance for your great insight and wisdom from the last thread and hopefully now as well,

Steve

PS: here is the original thread (if anyone cares): http://forums.thepaceline.net/showthread.php?t=17163

[JasonF]

Hi Steve,

In another life I was a corporate M&A tax attorney. Although my knowledge of royalty taxation is pretty limited, plan on reserving enough to cover the payments received as ordinary income. In fact, you may want to calculate yourself or have a cpa determine if you need to make an estimated tax payment in light of this new income. If this income surpasses a certain level such that your current withholding isn't sufficient, you could be subject to interest & penalties next April. Tax law is so mind numbing that I thankfully no longer practice!

[alancw3]

Hi Steve,

In another life I was a corporate M&A tax attorney. Although my knowledge of royalty taxation is pretty limited, plan on reserving enough to cover the payments received as ordinary income. In fact, you may want to calculate yourself or have a cpa determine if you need to make an estimated tax payment in light of this new income. If this income surpasses a certain level such that your current withholding isn't sufficient, you could be subject to interest & penalties next April. Tax law is so mind numbing that I thankfully no longer practice!

was a cpa in a different life many years ago for twenty some odd years. jasonf seems to have covered it pretty well. congrads on your windfall!!!

[SoCalSteve]

Hi Steve,

In another life I was a corporate M&A tax attorney. Although my knowledge of royalty taxation is pretty limited, plan on reserving enough to cover the payments received as ordinary income. In fact, you may want to calculate yourself or have a cpa determine if you need to make an estimated tax payment in light of this new income. If this income surpasses a certain level such that your current withholding isn't sufficient, you could be subject to interest & penalties next April. Tax law is so mind numbing that I thankfully no longer practice!

Thank you so much for the heads up. I went online to the IRS website and downloaded the forms ( not form mind you, FORMS-7 pages worth) of stuff I needed to calculate whether I need to make estimated tax payments or not. Turns out I dont...But, I will take your advice and stash away 35% for tax season!

The rest will go towards credit card payments! Yipppppeeeee!!! :banana:

Steve

[Sandy]

Thank you so much for the heads up. I went online to the IRS website and downloaded the forms ( not form mind you, FORMS-7 pages worth) of stuff I needed to calculate whether I need to make estimated tax payments or not. Turns out I dont...But, I will take your advice and stash away 35% for tax season!

The rest will go towards credit card payments! Yipppppeeeee!!! :banana:

Steve

So Steve, just where are you going to stash away the 35%?? :rolleyes: :)


:) Super Slick Serotta Sandy :)

[SoCalSteve]

So Steve, just where are you going to stash away the 35%?? :rolleyes: :)


:) Super Slick Serotta Sandy :)

Someplace quite boring, actually. My Merrill Lynch retirement account. Sorry if I disappointed you Mr Super Slick Sandy.

Steve

[stevep]

hey i spend a lot on gas..i should get a piece of that money!
at least a small part should be mine. how about $7,000 for a meivici?
well call it even.

[Too Tall]

Californi is the place I'd like to be...

[SoCalSteve]

Californi is the place I'd like to be...

I saw that coming a mile away!

[SoCalSteve]

hey i spend a lot on gas..i should get a piece of that money!
at least a small part should be mine. how about $7,000 for a meivici?
well call it even.

What's truly amazing is that it came with a statement that breaks the money down in quarter of a year incriments. The last quarter of 2005 and the first quarter of 2006 show the highest gains. Almost double to that of the earlier years.

I wish it wasnt as much money and oil prices were down.

Steve

[Too Tall]

Glad to help :rolleyes: Tell me you aren't feeling guilty about this. If you were than two words come to mind Meivici Now.

[SoCalSteve]

Glad to help :rolleyes: Tell me you aren't feeling guilty about this. If you were than two words come to mind Meivici Now.

If you think that buying myself a Meivici may help with my feelings of guilt, I will order one for myself today. I'll have them copy the geo's of my Kirk!

Thanks for the great advice!

Steve

[Too Tall]

Of that I am certain. Man...now I've just got to check my back 40. Just a little envious of you bro.

[SoCalSteve]

Of that I am certain. Man...now I've just got to check my back 40. Just a little envious of you bro.

Don't be....After paying the tax on it and using the rest to pay off credit card debt,there aint much left, cept maybe a Starbucks.

Its all good though as the credit card debt was for the Pegoretti BLE and probably some other bike parts/stuff. I cant remember anymore.

Steve

[alancw3]

i was thinking some more about your windfall oil royalites as i was doing my ride this morning. one more point crossed my mind. you may be entitled to some sort of depletion allowance or amortization of a portion of the basis of your property to partially offset the income derived thereon. this could have something to do with how your deed was conveyed to you i.e. mimeral rights. as suggested before check with a tax advisor that is familiar with these types of transactions. you may want to ask some neighbors how they handle. good luck you lucky guy.

[Too Tall]

BLE :) Wellllll, you didn't say. Hello nurse :cool: That one is def. on "the list" two down and one to the right of twins.