Many people in the U.S. wonder whether they should sell their oil and gas investments. The right to sell oil and gas investments is a luxury enjoyed by Americans for the most part; in most other countries, the sovereign, government, sheikh, or king holds the right to all oil and gas assets. So, in a way, Americans are fortunate to have the right to buy and sell their mineral rights.
The question whether you should hold on to your oil and gas investment or sell them depends on your need for accelerated cash and stomach for risk. The decision to sell mineral rights is certainly not easy. You must know how you will benefit from selling your oil and gas financial assets. Armed with the knowledge about the benefits of selling your mineral rights will allow you to make an educated decision that is best for you.
Below, we have listed 3 major benefits of selling your mineral rights.
1. Tax Savings on Selling Your Mineral Rights
When you sell your oil and gas investments that you have held for a period greater than one year, the profit on sale is qualified as a long term gain. The tax rate that is applied on long term capital gain is lower as compared to those on your monthly royal receipts. This allows you to maximize the returns from your mineral rights.
2. Accelerated Cash Flow
By selling your mineral rights, you no longer have to wait till the end of the month to receive cash. You can have immediate lump sum payment equal to (or greater than) the net value of all the monthly receipt on the oil and gas investment. You can use the obtained cash to build your home in your ideal location, get behind the wheels of your dream car, save for your retirement, or finance tuition fees of your children.
3. Avoid Accounting Hassles
When you sell your mineral rights, you no longer have to track burdensome documents and monitor accounting data. You will not have to pay for bookkeeping expenses to keep track of expenses and revenues relating to the mineral asset. By selling your oil and gas investment, you will avoid all these accounting hassles and receive quick cash payment for your mineral rights.
In the end, the chances of a cash windfall heading your way by winning the lotto is highly unlikely; selling your mineral rights seems like winning a lottery. You will gain instant access to large amount of cash when you sell your mineral rights. The cash you receive will most probably be more than what you would receive in the form monthly receipt during your lifetime.
