properties. This can be a bit tricky because mineral rights are considered intangible property, and real estate is considered tangible property. However, the IRS allows for the exchange of both tangible and intangible property as long as they are used for business or investment purposes. The key factor in a 1031 exchange involving mineral rights is that the properties being exchanged must both be held for investment or used in a trade or business. Here are some important points to consider: BOTH PROPERTIES MUST BE HELD FOR INVESTMENT PURPOSES. The property you are selling and the mineral rights you are acquiring must both be used for investment purposes. If you are selling a rental property and acquiring
The IRS allows for the exchange of both tangible and intangible property as long as they are used for business or investment purposes.”
mineral rights can vary depending on the location, type of resources, and existing leases, so due diligence is key to making a sound investment. USE A QUALIFIED INTERMEDIARY. As with any 1031 exchange, you must work with a qualified intermediary to handle the exchange of funds. The QI will ensure the exchange complies with IRS rules and can help you navigate the complexities of a mineral rights transaction. A Section 1031 tax exchange is a powerful tool that can help you defer taxes when selling real estate, giving you more capital to reinvest. If you’ve been considering mineral rights, a 1031 exchange can be an excellent way to do so while preserving your equity. However, because the process can be complex, it’s crucial to work with professionals, including real estate experts, tax advisers, and attorneys who can guide you through the intricacies. At Eckard Enterprises, we have 40 years of experience helping accredited investors directly own mineral rights and other royalty-generating energy assets. We’ve seen firsthand how 1031 exchanges have
helped our clients expand their portfolios beyond traditional real estate. Reach out to our team at info@eckardenterprises. com to learn more about mineral rights and the benefits they have to offer.
mineral rights that you intend to lease out for royalties, this could qualify as a like-kind exchange.
TROY W. ECKARD
MINERAL RIGHTS CAN QUALIFY AS LIKE- KIND PROPERTY. The IRS has determined that mineral rights can be considered like-kind property with real estate when both properties are held for investment. This means that if you’re selling an investment property, you can use a 1031 exchange to acquire mineral rights, as long as the mineral rights are also intended for investment or business use. DUE DILIGENCE IS ESSENTIAL. Although the IRS allows the exchange of mineral rights, the process can be more complicated than a typical real estate transaction. You must carefully evaluate the mineral rights you are acquiring, ensuring they are legally sound, and you may want to consult with experts to understand the potential for extracting resources from the land. The value of
Troy W. Eckard uses his four decades of oil and gas expertise to lead Eckard Enterprises LLC and make direct ownership of oil and gas assets possible for high-net-worth investors. Since 2019, his company has secured $850 million in capital across more than 90 projects and acquired mineral rights, working interests, and the second- largest natural gas pipeline in the Gulf of Mexico. Eckard currently owns interests in more than 7,000 wells and has distributed $110 million in cash flow to investors during the last four years.
22 | think realty magazine :: march - april 2025
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