Wildcat Bill carves out a production payment for $100,000 from his working interest in a producing property

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Wildcat Bill carves out a production payment for $100,000 from his working interest in a producing property in order to avoid the "net income limitation" for percentage depletion purposes, transferring the interest to Developer Dan. The payment is not dedicated to exploration or development, and it is reasonable to assume payout of the production payment well before depletion of the oil and gas on the lease. What is the tax treatment of the $100,000 to Bill and Dan?

Posted Date: Oct 04, 2021 12:53 AM

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Wildcat Bill carves out a production payment for $100,000 from his working interest in a producing property

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