Section 1254

Houco decides the property is no longer a strategic fit and sells it realizing a gain of 6 000 000 all attributable to the mineral rights.

Section 1254. In the case of the disposition of an undivided interest in a section 1254 property or a portion thereof a proportionate part of the expenditures or deductions described in paragraph 1 a with respect to such property shall be treated as allocable to such undivided interest to the extent of the amount of the gain to which paragraph 1 applies. The internal revenue code includes multiple classifications for property. Section 1254 property including intangible drilling and development costs exploration costs and costs for developing mining operations section 1255 property which is cost sharing payment property described in section 126 of the internal revenue code you can see from the examples that only certain section will apply.

Learn about 1231 1245 1250 property and its treatment for gains and losses. That seems very nebulous and even more nondescript. That seems very broad and nondescript.

Section 1254 property is oil and gas geothermal or other minerals properties. The term section 1254 property means any property within the meaning of section 614 if a any expenditures described in paragraph 1 a are properly chargeable to such property or b the adjusted basis of such property includes adjustments for deductions for depletion under section 611. 1254 a 3 a any expenditures described in paragraph 1 a are properly chargeable to such property or i r c.

For the definition of the term section 1254 costs see paragraph b 1 of this section. The term section 1254 property means any property within the meaning of section 614 if i r c. 1254 a 3 b.

1254 recapture rules example 1 houco drilled its first well on the bauer property in the permian basin in 1985 and drilled multiple wells on it through 2006. Part iii section 1254 is any new or used tangible or intangible personal property that has been or could have been subject to depreciation or amortization. Section 1245 is a mechanism to recapture at ordinary income tax rates allowable or allowed depreciation or amortization taken on section 1231 property.

Digging further we learn that property is defined as each separate interest owned in a mineral in each separate parcel of land.