Oil and gas royalties are nothing new, but with the current tax laws, specifically IRC (Internal Revenue Code) 1031, they are making more and more sense to investors. The long-term track record of oil and gas royalties is stellar, and in virtually all cases, outperforms other similar investments such as real estate or other securities.
Whenever you sell business or investment property and you have a gain, you have to pay tax on the gain at the time of sale. IRC 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange, such as one which provides oil and gas royalties. Gains deferred in a like-kind exchange under IRC 1031 are tax-deferred, but are not tax-free.
There are time limits for the exchange, but certain extensions are available in many circumstances, and the time frame involved is long enough to acquire oil and gas royalty assets.
Read on to learn more about 1031 exchange requirements and how you can leverage this with oil and gas royalties through Royal Mesa Minerals.