Texas 1031 Qualified Intermediary · Midland & Dallas

1031 Exchanges for Oil, Gas and Mineral Rights

Selling minerals, royalties or a working interest? You may be able to defer the capital gains tax by exchanging into other real property, including rental homes, land or commercial buildings.

1031 Ventures works with mineral owners across the Permian Basin and beyond. Our team has handled oil, gas and mineral exchanges for years, and we coordinate with your landman, attorney and CPA so the interest you’re selling is properly treated as real property.

Do Mineral Rights Qualify for a 1031 Exchange?

Often, yes. Under the Treasury Regulations, an interest qualifies if it’s real property under state law and meets the federal definition. In Texas and most producing states, these interests are generally treated as real property:

fee mineral interests (owning the minerals in place)
perpetual royalty interests and non-participating royalty interests (NPRIs)
overriding royalty interests that last as long as the lease
working interests, which need careful review of the structure and how the interest is held

Interests that generally don’t qualify, or need careful review, include term royalties that end after a fixed period, production payments, and interests held through a partnership or other entity rather than owned directly.

What Can I Exchange Mineral Rights Into?

Because like-kind is broad for real property, you aren’t limited to buying more minerals. Mineral owners commonly exchange into:

other mineral and royalty interests
single-family rentals and multifamily property
farm and ranch land
commercial and net-lease property
Delaware Statutory Trust (DST) interests

Exchanges can also go the other way, from real estate into mineral or royalty interests.

Common Mineral Exchange Scenarios

Selling inherited minerals. Heirs often get a stepped-up basis, so check the gain before deciding whether an exchange makes sense.
Taking a large offer from an operator or mineral buyer and wanting to keep the equity working instead of paying tax.
Diversifying out of oil and gas into rental income that doesn’t depend on commodity prices.
Selling surface and minerals together on a ranch, and exchanging the whole package.

What to Watch For

Engage the QI before closing. Mineral sales often close quickly by deed and wire. Call us as soon as you sign a purchase agreement.
Describe the interest precisely on your 45-day identification, including county, legal description, lease or unit, and the decimal interest.
Separate the real property from the rest. Accrued royalties, suspended funds and equipment on a working interest aren’t real property and may be taxable boot.
Depletion and depreciation recapture can create taxable income even in a deferred exchange. Your CPA should run the numbers.

Talk With a Mineral Rights 1031 Specialist

Donna Cowdrey has completed thousands of 1031 exchanges totaling over $36 billion, and our attorney and CPA team members know oil and gas. Start an exchange or call 432-934-1479.

Ready to Start Your 1031 Exchange?

Call before your sale closes. A qualified intermediary has to be in place first.

General information only, not tax or legal advice. Whether a particular interest qualifies depends on its terms and on state law. Confirm it with your tax and legal advisors.

Qualified intermediary for 1031 exchanges of investment real estate, land, and oil, gas & mineral interests. Exchange funds are held in a qualified escrow account at a federally insured bank.