Stepped-Up Basis
For inherited assets, the cost basis used to calculate a future capital gain resets to the value on the date of death — which for inherited minerals often removes most or all of the embedded gain.
Why it matters when you sell
For heirs considering a sale, the step-up is frequently the largest tax fact in the transaction, and owners routinely overestimate what they would owe because they assume their basis is whatever a grandparent paid decades ago. Understanding the position before marketing changes what a given offer is actually worth to you after tax.
Example
Minerals acquired in 1951 for almost nothing are appraised at $180,000 when the owner dies in 2024. An heir selling in 2026 for $195,000 is measuring gain against $180,000, not against the original cost — roughly $15,000 of gain rather than $195,000. The difference in federal tax alone runs to tens of thousands of dollars.
How this varies across the states we serve
The step-up itself is federal and applies wherever the minerals sit, but the amount you keep after a sale also turns on state income tax. Neither Texas nor Wyoming imposes one, which leaves the federal calculation doing nearly all the work. Colorado, Oklahoma, New Mexico, North Dakota and Montana each layer their own on top, and selling minerals in a state you do not live in can mean withholding at closing that gets squared up later on a state return.
What to have in hand
Obtain a date-of-death valuation while the estate is fresh, and keep it with the estate papers. Reconstructing that figure years later is difficult and the step-up is harder to support without it. This is general information rather than tax advice — confirm your own position with a CPA familiar with mineral interests.
Going deeper: Taxes When You Sell Mineral Rights
Related terms
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