Donate or Sell? Maximize Your Mineral Rights Decision
“Why donate my minerals when I could just sell them?”
It’s a perfectly reasonable question. After all, one could sell their minerals and always just donate some cash to the non-profit organization of their choice. And if your personal beliefs align with our Vision, we are happy to accept any cash donation you feel compelled to give. Below, we highlight a few reasons why donating minerals may be a better alternative.
Income Tax Deduction. As many know, when you donate property to a qualified non-profit organization, you may be eligible for a tax deduction based on the fair market value of the property. This can significantly reduce your taxable income, providing financial benefits while supporting a cause you believe in. However, this also requires an appraisal from a qualified party to determine the fair market value of the donated minerals.
Capital Gains Avoidance. When you sell property that has appreciated in value, you may owe capital gains taxes on the profit. Inherited minerals are especially troubling, as the tax basis on the minerals is typically very low and the mineral owner may be subject to capital gains tax on the entire amount realized. The mineral owner may need to hire a professional to determine their tax basis and provide other tax advice on the transaction. However, by donating it, you bypass these taxes, allowing the full value of the asset to benefit both the charity and your financial situation.
Less Hassle. Donating minerals may be a less stressful process compared to selling. The oil and gas industry isn’t exactly known for honesty and fair-dealing, and mineral buyers are some of the worst offenders. Selling requires finding a legitimate buyer, negotiating fair terms, and handling legal paperwork, which can be time-consuming and costly. A donation, on the other hand, is often simpler and quicker. If you are not seeking a tax deduction, a donation typically just requires signing a 2 or 3 page deed (which we can prepare) and filing in the County deed records.
Legacy. Donating property allows you to leave a lasting legacy. When supporting a non-profit, your contribution can have a meaningful, long-term impact. Rather than focusing solely on financial gain, donating minerals enables you to create a positive difference in the world. Many mineral buyers will just resell your minerals to another party, who will resell it again. They will never really have a connection with you again. If you donate to us, we will not sell the minerals. Your minerals are held by us and any financial benefits goes to fund our core programs.
To summarize, there are a number of reasons why it may be advantageous to donate mineral rights instead of selling them. Tax justifications are a big reason, but every tax situation is different and you should discuss these with a CPA or other financial professional. There is less hassle, and more trust, involved with donating versus selling mineral rights. And, when you donate, your mineral rights aren’t going to a faceless corporation, but to a qualified non-profit with a goal to make a positive change, and use those minerals to help achieve this end.
Click below for more information on donating minerals! Or contact us to get in touch!
