North European Oil Royalty Trust
Office of the Managing Director
P.O. Box 456
Red Bank, New Jersey 07701
(908) 741-4008
IMPORTANT
RETAIN THIS LETTER FOR PREPARATION OF YOUR
1995 INCOME TAX RETURNS
THE TRUST DOES NOT FILE NOR FURNISH TO OWNERS FORM 1099
January 8, 1996
To the Present and Former Unit Owners of
North European Oil Royalty Trust:
This letter sets forth the information you will require for
preparation of your personal income tax returns in connection
with ownership of units of beneficial interest ("Units") in North
European Oil Royalty Trust ("Trust") during 1995.
For Federal income tax reporting purposes, each owner of
Units in the Trust is considered to be a grantor or substitute
grantor as well as a beneficiary of the Trust. As such, you are
deemed to have received your pro rata share of overriding
royalties when paid to the Trust and are permitted to deduct your
share of Trust expenses. Consequently, your net taxable income
may not correspond exactly to the cash distributions received.
TRUST DISTRIBUTIONS SHOULD NOT BE INCLUDED ON INCOME TAX RETURNS
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AS "DIVIDEND INCOME" AND ARE NOT ELIGIBLE FOR THE DIVIDENDS
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RECEIVED DEDUCTION FOR CORPORATIONS.
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The Internal Revenue Service has ruled that the overriding
royalty rights held by the Trust represent economic interest in
oil and gas deposits. Consequently, income realized from such
interests is taxable to each Unit owner as ordinary income
subject to cost depletion. Each Unit owner's basis for computing
cost depletion is the adjusted cost basis for their Units. This
adjusted cost basis is to be reduced annually by the depletion
previously allowed. Ralph E. Davis Associates, Inc. of Houston,
Texas, based upon computations of proven reserves estimated in
accordance with accepted engineering analytical principles, has
recommended that the percentage to be applied to the cost basis
to determine deductions for cost depletion for the year 1995 is
9.343%. The suggested percentage for cost depletion deduction
will be adjusted annually in accordance with reported production
results and revised reserve estimates. Since the above
percentage covers the entire year 1995, if you owned Units for
only a portion of the year, you are required to pro rate the
percentage depletion in the ratio that the total income per Unit
shown on the schedule below for the period of your ownership
bears to the total income per Unit for the entire year.
If you owned Units for the period January 1, 1995 through
December 31, 1995, you will be considered to have received and
expended, on the cash basis, the respective totals shown below
for each Unit. On the other hand, if you owned Units during only
a portion of that period, then the schedule shows the amounts of
income and deductible expenses reportable by you for each Unit
owned for the respective months. For your information, income is
received between the 24th and the end of each month.
Income per Unit Expenses per Unit
January 1995 $ 0.1343 $ 0.0085
February 0.1019 0.0094
March 0.1406 0.0066
April 0.1945 0.0029
May 0.1232 0.0058
June 0.1368 0.0043
July 0.1076 0.0050
August 0.1209 0.0053
September 0.1218 0.0041
October 0.1214 0.0044
November 0.1220 0.0067
December 0.1083 0.0067
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TOTAL 1995 $ 1.5333 $ 0.0726
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Income and expenses should be reported on Federal Income Tax
Form 1040, Schedule E. Under Part I, Income or Loss from Rentals
and Royalties, line 1 enter property description as "oil and gas
overriding royalty rights, Germany through North European Oil
Royalty Trust." Your income and expenses are calculated by
multiplying the above per Unit figures by the number of Units you
owned. Your income should be entered on line 4. Expenses should
be entered on line 18 as "miscellaneous Trust expenses." Your
cost depletion deduction should be entered on line 20. This
figure is derived by multiplying the total adjusted cost of all
your Units by .09343. Your adjusted cost is your original cost
minus depletion deducted in prior years. Your net reportable
income or loss should be entered on lines 22 and 26 in Part I and
on line 40 in Part V and is determined by subtracting the amounts
entered on lines 18 and 20 from the amount on line 4. All of the
above entries should be adjusted for the period of time you owned
your Units, if you did not own them throughout 1995.
The royalty income received by the Trust represents income
from Germany. Although there are no German taxes imposed on this
income, this information should be considered if you have
available foreign tax credits from other sources.
The Trust will submit this letter and the listing of Unit
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owners during 1995 to the Internal Revenue Service. This list
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will contain names, addresses, tax ID or Social Security numbers;
you may wish to attach a copy of this letter to your tax returns.
Most sincerely,
/S/ John R. Van Kirk