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Oil/Gas/basis calc for W/I capital gain upon sale


Laura, Thank you for taking the time to answer this.  I have a WI position (very small %) in 17 oil/gas wells in Oklahoma (mostly Kingfisher County) some dating back to the early 1980's and 9 were drilled since 2008.  I have ZERO information about any early wells original investment and write-offs but I have all data on the 9 recent ones.  I receive a monthly net revenue check for many years from $700 to $900 per month.

I just received a check for $110,000 with details on the cash received breakout of each individual well.  The entire company was
sold for $60,000,000 about one month ago. THis is a family held business started about 50 years ago and 2 key men just died.

7 of the early wells had "acreage" value as well - while none of the recent wells do.  This "acreage" value amounts to over $50,000.  I did not even know about this.  As we never used an oil/gas CPA, I have done the best I can with taxes each year with a simple process.  I deduct 15% depletion from net cash revenue on sales and take the intangibles for drilling in the year drilled.  I deduct the tangibles over 7 years.  I receive a 1099 misc for the income, make those subtractions on schedule C and add or subtract on the front side of the 1040 for income from self-employment.   

How do I calculate the basis in each well for long term capital gain on schedule D?  I believe I recapture all the intangibles expensed off.  What happens to all the operating expenses each month?  How do I know the original value of the "acreage".  

Is the original basis in each well anything other than what I paid to participate in the well when drilled?   What adjustments are made to that?  I refuse to believe the entire check of $110,000 is all long term gain with zero basis in all wells.

The "acreage" value was never accounted for in any way at tax time each year because I did not even know about it.  I want to assume the basis on the acreage is the current value.  

I think you will refer me to consult with an oil/gas CPA firm as this matter is very complicated I'm sure. I will muddle through myself somehow as IO will never have all the information necessary back 35 years and on each subsequent tax return.  

Thank you.

While I feel quite competent in answering oil and gas questions in many areas, one area that I have to rely on my oil and gas CPA in, are WI ownership questions such as yours that you have asked me.

What I can suggest, however, is that you do go back and ask for the 'source document', the document that created the interest that you currently own.  This is the only way I believe you can understand what your ownership covers is to understand the situation that created the interest.

Other than this, yes, you are correct in that I would highly recommend you seek an oil and gas accounting firm who can help you work through the many questions you have, and rightfully so.

I will tell you though, that the steps you have taken which you have undertaken 'to the best of your ability' sound correct and you have done a good job, so congratulations thus far!

I wish I could offer you more help in this area - please continue to seek advice on this.

Best of luck.  


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Laura M. FitzGerald, CPL


PLEASE READ CAREFULLY BEFORE SUBMITTING A QUESTION. I can answer all questions related to oil and gas ownership, mineral interests and working interests concerning the leasing and selling of your minerals, any questions concerning pipeline ROW's, units with the Louisiana Department of Conservation; pooling provisions, depth limitations, vertical or horizontal pugh clauses; and oil and gas terminology. I can offer assistance in negotiating for leasing your property, assisting in locating owners of suspended funds or to receive the best offer for your oil and gas interests, should you desire to sell. I am only able to answer questions regarding oil and gas leases, minerals, royalties, or offers to purchase mineral/royalty interests if I have complete information. Please provide a full legal description for your interest(s). If the question pertains to a lease, please include all terms of any current (or desired) lease offers, including lease bonus amount, royalty and lease term. If the question is regarding a mineral or royalty interest offer to purchase, please provide the offer amount, date of offer, other offer terms, and further details on the mineral/royalty interest, such as lease terms, and if producing, the average monthly income. Since I receive numerous inquiries daily, I am only able to answer your questions efficiently and effectively if I have complete information. I must decline any questions submitted with incomplete information. If your question is non-technical in nature and you simply need assistance understanding an oil and gas matter, please submit your question with as much information and detail as possible. Any background information that has led to your question is also very helpful.


I have over 34 years experience as an Independent Petroleum Landman. I became a Landman after working as a paralegal for Oil & Gas Attorneys for 8 years. My first 2 years were spent specializing in Well History and Research with the Louisiana Department of Conservation, then moving into clearing title defects and handling title curative for oil and gas properties for the next 6 years. Subsequent thereto, I handled title issues, buying oil and gas leases and settling surface damages. I also acquired acreage for drilling prospects in excess of 10,000 acres. I also became a mineral/royalty owner commencing in 2004 and have found that I can help many people when they have reached the point in their lives they feel converting their minerals or royalties into a cash asset benefits them.

American Association for Professional Landmen, ArkLaTex Assoc. of Professional Landmen, and Dallas Association of Professional Landmen (DAPL), Certified by the Women's Business Enterprise National Council (WBENC)- South. This certification is one of the most widely recognized and respected certifications in the nation. This designation is reserved for only those women-led businesses that exemplify the characteristics of integrity and professionalism to which the WBENC adheres to so strictly.

Attended LSU, became a Certified Professional Landman in 1994; Notary Public with dual authority in multiple parishes in North Louisiana; Bilingual in English and Greek

Awards and Honors
Expert Oil & Gas Professional assisting attorneys representing landowners. Involved in 2 lawsuits and both suits were awarded to the landowner. Ilios Resources, Inc. has been awarded the Best of Shreveport Oil and Gas Mineral Buyer Award for 2016, 2015, 2014, 2013 and 2012.

Past/Present Clients
Consultant Landman for Texas Oil & Gas (TXO Production Corp.), Anadarko Petroleum, Comstock Resources,Independent Geologists, Pipeline ROW Clients, and Oil & Gas Attorneys. For the past 5 years my practice is primarily an advocacy for the landowner. I also assist royalty owners recover suspended payments or incorrect royalty payments, or sell their mineral or royalty interest.

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