Oregon Tax Consultants Practice Exam

Where do you report the sale of mineral rights or oil and gas wells?

1. Schedule C

2. Schedule D

3. 1040 Line 2b

4. Schedule E

The correct answer is: Schedule D

The sale of mineral rights or oil and gas wells is reported on Schedule D. This is the appropriate form used for reporting capital gains and losses, which includes transactions involving the sale of assets such as mineral rights, stocks, bonds, and other investment properties. When you sell mineral rights or oil and gas wells, it is treated similarly to other capital asset transactions, where the gain or loss is calculated based on the difference between the selling price and the original purchase price (adjusted basis). Schedule D helps taxpayers report capital gains or losses, which are transferred to Form 1040 to compute the tax owed. Since the nature of mineral rights and oil and gas wells aligns with capital asset transactions, using Schedule D allows for accurate representation of any resulting profits or losses from such sales on your tax return.