I got a call from a client who owns 100+ acres of vacant land. (not his residence)He has an offer of $1300.00 per acre for a 5 year lease for oil & gas drilling rights. His question to me was: Is the whole amount ($130,000.00+) going to be taxable in tax year 2010 when he receives the total amount, or will it be pro-rated over the 5 year period. Off the top of my head I told him I believe it would all be taxable in the year received. I have spend a couple hours trying to find an answer to this situation on the IRS website with no success. If anyone has any idea or oponion in this, I would greatly appreciate and help.
Thanks you!!
Ray