Royalty Trusts


  • John A. Brussa



Energy Law, Petroleum Law


This article outlines several key economic and income tax aspects of the royalty trust financing form. The author describes various ways to structure a royalty trust, to ensure that it will function as a successful financing vehicle with the ability to take maximum advantage of certain tax consequences which are enumerated by the author. Three variations of the royalty trust structure are identified by the author: (a) the classic royalty trust, (b) the income trust, and (c) the acquisition royalty trust. Each of the three variations are distinguished on the basis of their economic utility, and in particular their structure and their resulting tax implications — the greatest attention being given to the classic royalty trust variant. The author concludes that notwithstanding the complexity of these structures, royalty trusts can provide a flexible financing vehicle, having the ability to achieve desirable economic results.