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sale of mineral rights

ratherfarm
Level 2

A farmer father gives his son a farm but withholds mineral rights.  5 years later the son sells the farm and must include mineral rights.  The son buys the mineral rights from the father for $24000.  Does the son send his father a 1099 other income?   Does the father report on 4835 farm rental or on 4797?

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TaxGuyBill
Level 15

@ratherfarm wrote:

A farmer father gives his son a farm but withholds mineral rights.  5 years later the son sells the farm and must include mineral rights.  The son buys the mineral rights from the father for $24000. 

Does the son send his father a 1099 other income?   

Does the father report on 4835 farm rental or on 4797?


 

For the most part, only businesses need to issue 1099s and I'm not aware of an exception in the case of mineral rights.  I don't see the mineral rights as being a business for the son.  If that is the case, I don't see why the son would need to issue a 1099.

If the father was using the mineral rights for a business, it goes on Form 4797.  If he was just holding it for personal investment purposes, then Form 8949/Schedule D.

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TaxGuyBill
Level 15

@ratherfarm wrote:

A farmer father gives his son a farm but withholds mineral rights.  5 years later the son sells the farm and must include mineral rights.  The son buys the mineral rights from the father for $24000. 

Does the son send his father a 1099 other income?   

Does the father report on 4835 farm rental or on 4797?


 

For the most part, only businesses need to issue 1099s and I'm not aware of an exception in the case of mineral rights.  I don't see the mineral rights as being a business for the son.  If that is the case, I don't see why the son would need to issue a 1099.

If the father was using the mineral rights for a business, it goes on Form 4797.  If he was just holding it for personal investment purposes, then Form 8949/Schedule D.

View solution in original post