We have a client that has two gas wells on his farm property, installed in 2009, that he receives 1/8 royalty payments on all gas sales as the landowner through a lease. The lease has expired do to company mismanagement, and there are currently no commercial sales of gas. He is purchasing 25% of the well owners working interest in the two wells. When a well operator eventually decides to sell gas again, they will have to renegotiate a new lease with him. He will then trade the 25% working interest he purchased for another 1/8 royalty to raise his total royalty to 1/4 of gas sales. He is buying now and not sure when this trade will occur. 6, 12, 18 months, it is unknown.

How should this be treated tax wise on both the purchase and then the trade?