Exhibit 99.3 - 47 -
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
1996 INCOME TAX RETURNS
THE TRUST DOES NOT FILE NOR FURNISH TO OWNERS FORM 1099
January 9, 1997
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 (the
"Trust") during 1996.
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 AS "DIVIDEND
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INCOME" AND ARE NOT ELIGIBLE FOR THE DIVIDENDS RECEIVED DEDUCTION
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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 1996 is 7.891%. 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
1996, 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, 1996 through December 31,
1996, 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
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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 1996 $ 0.0890 $ 0.0129
February 0.0949 0.0051
March 0.1046 0.0075
April 0.1076 0.0063
May 0.0892 0.0032
June 0.0667 0.0103
July 0.0507 0.0050
August 0.0729 0.0023
September 0.1041 0.0054
October 0.1167 0.0056
November 0.1397 0.0044
December 0.1067 0.0058
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TOTAL 1996 $ 1.1428 $ 0.0738
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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 .07891. 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 1996.
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 owners during
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1996 to the Internal Revenue Service. This list will contain names,
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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