Faculty Journal Articles and Book Chapters


Mining The Tax-Free Exchange


Each year taxpayers spend billions of their hard-earned dollars on federal taxes. One way to defer taxes is to engage in a like-kind exchange under Section 1031 of the Internal Revenue Code. These exchanges allow taxpayers to defer taxation and have more of those dollars to spend today. A like-kind exchange (commonly referred to as a Section 1031 exchange) is particularly beneficial for oil, gas or other mineral properties. To qualify for tax deferral, the transaction must strictly comply with the statutory like-kind-exchange requirements. The Section 1031 exchange rules first require that both the property transferred and the property received are held for productive use in a trade or business or held for investment purposes. The exchange cannot involve property you hold or intend to acquire for personal use. Structuring the disposition of an interest in mineral property as a like-kind exchange is substantially beneficial from a tax perspective. Through the exchange, the seller of mineral interests defers paying federal income tax on the transaction.

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Oil & Gas Investor Magazine

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