North European Oil Royalty Trust is a Grantor Trust. Unit owners of the Trust are, for tax purposes, considered part owners in the overriding royalty rights which the Trust holds for their benefit and from which their income is derived. The reporting for tax purposes of the income received by unit owners of the Trust is governed by a private letter ruling issued by the Internal Revenue Service at the time the Trust was organized. Under this ruling, unit owners should calculate their taxable income according to the instructions and figures contained in the tax letter issued annually by the Trust. Those unit owners holding their units through a bank or brokerage should not use the Form 1099 issued to them as the basis for their tax calculations. The income shown on the Form 1099 would reflect income based on the Trusts fiscal year. As a part owner in the overriding royalty rights, a unit owner is required to report taxable income based on the calendar year.
In the annual Tax Letter, there are three primary components to the calculation of taxable income: the gross income listed on a month by month basis; the expenses listed on a month by month basis; and an annual depletion percentage. There are provisions outlined in the letter that allow you to pro-rate the annual depletion percentage for your period of ownership if that period is less than a year. I would refer you to the appropriate tax letter contained herein for the specific year you need. Each tax letter contains detailed information on how to calculate your taxable income for that specific year.