Investors with legal title to the percentage of royalties purchased may qualify for a 1031 Exchange.  Investors may be able to exchange their working or royalty interest in oil and gas for another working or royalty interest.  They may also be able to exchange a working or royalty interest in oil and gas for income producing real estate. 

As such, it provides a 1031 Exchange alternative for individuals and companies looking to reinvest capital from recent investment real estate sales. Oil & gas royalties also represent an alternative for TIC investors seeking a passive vehicle.

It is important to note that if the royalty interests or surface rights are retained, the 1031 Exchange could be disallowed by the IRS.  It is important to receive tax advice regarding your exchange from a tax professional. 

Private royalty ownership offers many features to real estate investors. It is an alternative that may provide the same or better cash flow than other intensively managed forms of real estate. Royalty interests may also provide a hedge against the impact of sustained high or rising energy prices on other asset classes.

For more information on Oil & Gas and 1031 Exchanges, click here or call today.