Company: MTR
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001104659-25-049448
Chunk: 8

Company: MESA ROYALTY TRUST/TX
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 1
Chunk 8
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 Net Proceeds from production for such month without regard to when calculated or received, general and administrative expenses would be recorded in the month they accrue, and interest income for a month would be calculated only through the end of such month.

Segment reporting

The Trust has one business activity as the owner of an investment in net overriding royalty interest and operates in a single operating and reportable segment. Operating segments are defined as components of an entity for which separate financial information is evaluated regularly by the chief operating decision maker (the “ CODM”), which is the Trustee. The segment participates in activities and derives its income from net overriding royalty interest as reported in the accompanying financial statements, and the CODM uses this in making decisions about the allocation of cash reserves for current and future Trust general and administrative expenses and the ultimate distribution to the Trust unitholders.

Note 3  -   Legal Proceedings

There are no pending legal proceedings to which the Trust is a named party. The Trustee has been advised by the Working Interest Owners that it may be subject to litigation in the ordinary course of

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business for certain matters that include the Royalty Properties. While each of the Working Interest Owners has advised the Trustee that it does not currently believe any of the pending litigation will have a material adverse effect net to the Trust, in the event such matters were adjudicated or settled in a material amount and charges are made against royalty income, such charges could have a material impact on future royalty income.

Note 4  -   Income Tax Matters

In a technical advice memorandum dated February 26, 1982, the Internal Revenue Service (the “ IRS”) advised the Dallas District Director that the Trust is classifiable as a grantor trust and not as an association taxable as a corporation. As a grantor trust, the Trust incurs no federal income tax liability and each unitholder is subject to tax on the unitholder’s pro rata share of the income and expense of the Trust as if the unitholder were the direct owner of a pro rata share of the Trust’s assets. In addition, there is no state tax liability for the period.

Individuals, estates, and trusts with income above certain thresholds are subject under Section 1411 of the Code to an additional 3.8% tax  -  also known as the Net Investment Income Tax (“ NIIT”)  -  on their net investment income. Grantor trusts such as Mesa Royalty Trust are not subject