Many experts in energy investment expected a growth in demand for gas and oil worldwide and sees this as a driving force behind the price increase over the past years. Legacy Income Properties offer gas and oil mineral rights with advantages like having a value which is beyond simple yield; mineral rights investors are prioritized in the payment; has zero operational related expenses and low risk profile and an energy investment driven income which is alternative to stocks, bonds or mutual funds.
Energy investments thru IRA
Several self directed IRA investors have involved in energy investing towards gas and oil royalty investment. At Legacy Income Properties, they have provided the investors an opportunity to be involved in the gas and oil industry.
Royalty investments generated by energy investing through gas and oil project are exempted from taxes as self directed IRAs are not subject to tax pursuant. If in any case a self directed IRA is involved in an active business or trade, the income from that business is subject to tax. It is referred to as unrelated business taxable income (UBTI) tax. If this has been missed for several years, this means that the investor is subject to tax, penalties and interest.
How they are being taxed
Mineral royalties are excluded whether they are measured by gross or by production or taxable income from the mineral property. If an organization owns a working interest over a mineral property and it’s not yet relieved of it’s share of the cost of the development by the terms of any signed agreement with the existing operator, whatever income is received shall not be excluded.
As long as the income from the energy investment is measured by its production of income and is relieved by the share of the development costs, the royalty investment income will not be subject to unrelated business taxable income tax.
How a royalty trust works
Knowing how a royalty trust works is a lot easier than having to know the company itself. It is just the investor and those gas and oil minerals. What an investor needs to know is the unique characteristics of the royalty trust: production mix; the payback period and the remaining shelf life.
The type of hydrocarbons that come out of the ground have something to do with the success of a royalty trust. Oil has been more valuable than natural gas. However, it is difficult to predict the prices of these commodities in 10 years time.
The amount of time needed to have a break even is the payback period. Knowing how long the time is can give the investor a strong assurance on how good of a royalty investment the trust is.
Remaining shelf life of the trust
An investor needs to know how long the trust will last. This comes to three criteria: production, total reserves and trust termination conditions.
Experts from Legacy Income Properties
With most Legacy Income Property investing options, the investor owns a share of the hydrocarbons that is manufactured from the land that is worked on for a long time. Mineral reserve values may potentially increase, adding growth to an existing royalty investment depending on the level of development. Legacy Income Properties have the knowledge and experience in making you informed about energy investing.
To learn more about the advantages of using a self directed IRA to make self directed IRA investment, including energy investment through royal trust, Legacy Income Properties are more than willing to help you.