¹ This definition is consistent with the Securities and Exchange Commission (SEC) definition of royalty trusts; see SEC Staff Accounting Bulletin, Topic 12: Oil and Gas Producing Activities at 12E, “Financial Statements of Royalty Trust,” available at www.sec.gov/interps/account/sabcodet12.htm#12e.

² According to the SEC, any company with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public via the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system, at www.sec.gov/edgar/searchedgar/webusers.htm.

³ See Sec. 469(e)(1)(A)(i)(I). This discussion is limited to royalty trusts based in the U.S. and subject to U.S. tax law. It does not address Canadian-based royalty trusts, which sometimes are traded on U.S. exchanges.

⁴ See the Illinois Oil and Gas Association’s website at www.ioga.com for a history of crude oil prices.

⁵ See, e.g.,  http://finance.yahoo.com for yield data.

⁶ 17 CFR 229.801(b) (Securities Act industry guides, Guide 2: Disclosure of Oil and Gas Operations).

⁷ Industry terminology for carving out royalty interests is “spinning off” the interests. This is not, technically, a spinoff D reorganization, however; see Sec. 368(a)(1)(D). A shareholder’s basis in a property dividend is determined under Sec. 301(b)(1).

⁸ See Rev. Rul. 72-137, 1972-1 CB 101, and IRS Letter Ruling 8223015 (2/26/82).

⁹ Southland Royalty Company, 22 Cl. Ct. 525 (1991).

¹⁰ See Rev. Rul. 72-137, note 8 supra, and IRS Letter Ruling 8223015, note 8 supra.

¹¹ For examples of state law treatment, see Reese P. Fullerton v. Lucille C. Kaune, 382 P2d 529 (NM 1963); Neb. Rev. Stat. 77-103(4); Mesa Verde Co. v. The Montezuma Cty. Bd. of Equalization, 898 P2d 1 (CO 1995) and CO Rev. Stat. 39-1-102(14)(b).

¹² See Regs. Sec. 301.7701-4(c); IRS Letter Ruling 8223015, note 8 supra; and Rev. Ruls. 78-149, 1978-1 CB 448 and 75-192, 1975-1 CB 184.

¹³ See Prop. Regs. Sec. 1.671-2(f) and Rev. Rul. 85-13, 1985-1 CB 184.

¹⁴ See IRS Letter Ruling 8411017 (12/7/83).

¹⁵ See Regs. Sec. 1.611-1(a)(1) and IRS Letter Ruling 8411017, note 14 supra.

¹⁶ See pre-Revenue Reconciliation Act of 1990 (RRA ’90) Sec. 613A(c)(9) and (10). RRA ’90 Section 11521 repealed the cost-depletion requirement on the transferred proven-property rule, prospectively only. Proven properties transferred before Oct. 12, 1990, may not claim percentage depletion.