tax information 2018factors permits the presentation of a single cost depletion factor for all unit...

5JAN201215452948

TAX INFORMATION2018

This booklet contains tax information relevant to ownership ofUnits of Sabine Royalty Trust and should be retained.

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SABINE ROYALTY TRUSTFebruary 6, 2019

To Unit Holders:

This booklet provides 2018 tax information, which will allow you to determine your pro rata share ofincome and deductions attributable to your investment in Sabine Royalty Trust (the ‘‘Trust’’). Each Unitholder is encouraged to read the entire booklet very carefully.

The material included in this booklet enables you to compute the information to be included in yourfederal and state income tax returns, and the items of income, deduction, and any other informationshown in this booklet must be taken into account in computing your taxable income and credits on yourfederal income tax return and any state tax returns. This booklet, as well as any Forms 1099-MISCreceived from the Trust relating to backup withholding (discussed on page 4) and any IRS Forms 1099and written tax statements issued by certain middlemen (discussed in more detail on pg. A-1) that holdTrust Units on your behalf, are the only information sources for Unit holders to determine their share ofthe items of income and expense of the Trust for the entire 2018 calendar year. Unit holders should retainthis booklet and any Forms 1099 and written tax statements received from middlemen and anyForms 1099-MISC received from the Trust as part of their tax records.

The material herein is not intended and should not be construed as professional tax or legal advice.Each Unit holder should consult the Unit holder’s own tax advisor regarding all tax compliance mattersrelating to the Units.

For your convenience, simple revenue/expense and cost depletion calculators are nowavailable on the Sabine Royalty Trust website at: www.sbr-sabine.com, on both the ‘‘Home’’ pageand ‘‘Tax Information’’ page.

Very truly yours,

Sabine Royalty Trust,By Simmons Bank, Trustee1-855-588-78392911 Turtle Creek Blvd., Ste. 850Dallas, TX 75219EIN 75-6297143CUSIP 78568810

SABINE ROYALTY TRUSTTABLE OF CONTENTS

Page

2018 TAX INFORMATION� Reading the Income and Expense Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1� Identifying Which Income and Expense Schedules to Use . . . . . . . . . . . . . . . . . . . . . . . . 1� Applying the Data From the Income and Expense Schedules . . . . . . . . . . . . . . . . . . . . . 1� Computing Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2� Asset Sales and Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3� Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3� Sale or Exchange of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3� Classification of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3� Nonresident Foreign Unit Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3� Unrelated Business Taxable Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3� Net Investment Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3� Backup Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4� State Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4� Table of 2018 Monthly Record Dates and Cash Distributions Per Unit . . . . . . . . . . . . . . . 4� Tax Information Schedules

� � Form 1041, Grantor Trust for Calendar Year 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . 5� � Supplemental Tax Table I—Gross Royalty Income Federal . . . . . . . . . . . . . . . . . . . . 6� � Supplemental Tax Table II—Severance Tax Federal . . . . . . . . . . . . . . . . . . . . . . . . . 6� � Supplemental Tax Table III—Interest Income Federal . . . . . . . . . . . . . . . . . . . . . . . . 7� � Supplemental Tax Table IV—Trust Administrative Expense Federal . . . . . . . . . . . . . . 7� � Supplemental Tax Tables A through D Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8� � Supplemental Tax Tables A through C Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . 9� � Supplemental Tax Tables A through C Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10� � Supplemental Tax Tables A through C Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . 11� � Supplemental Tax Tables A through C Mississippi . . . . . . . . . . . . . . . . . . . . . . . . . . 12� � Supplemental Tax Tables A through C New Mexico . . . . . . . . . . . . . . . . . . . . . . . . . 13� � Depletion Schedule D-I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14� � Depletion Schedule D-II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14� � Depletion Schedule D-III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15� � Depletion Schedule D-IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

� Sample Tax Forms for Individual Unit Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18� Tax Computation Worksheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22� Comprehensive Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23� Sabine Royalty Trust Historical Tax Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26DISCUSSION OF TAX CONSIDERATIONS PERTAINING TO THE OWNERSHIP OF UNITS INSABINE ROYALTY TRUST� Tax Background and WHFIT Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

� � Effect of Escrow Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2� Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2

� � Cost Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2� � Percentage Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3

� Adjustment to Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3� Non-Passive Activity Income, Credits and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3� Revenue/Expense and Depletion Calculators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3� Nonresident Foreign Unit Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3� Sale or Exchange of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4� Backup Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5� State Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5� List of states’ contact information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7

(SRT 2018 TAX)

SABINE ROYALTY TRUST2018 TAX INFORMATION

Reading the Income and Expense Schedules

The accompanying income and expense schedule and tables reflect tax information attributable toSabine Royalty Trust (the ‘‘Trust’’) for 2018. This information has been assembled on a per-Unit basisand is expressed in decimal fractions of one dollar. A cumulative schedule for the twelve months endedDecember 31, 2018 and separate cumulative tables at the federal level as well as tables for each of thestates in which the Trust has properties are included. Separate depletion schedules are enclosed thatprovide the necessary information for Unit holders to compute cost and percentage depletion withrespect to their interests in the Trust.

Identifying Which Income and Expense Schedules to Use

Pursuant to the terms of the Trust agreement and the escrow agreement (discussed below onpage A-2), the Trust receives income and incurs expenses only on the Monthly Record Dates listed onpage 4. Furthermore, only Unit holders of record on Monthly Record Dates are entitled to cashdistributions. On the basis of these agreements, both cash and accrual basis Unit holders should betreated as realizing income and incurring expenses only on Monthly Record Dates. Therefore, if youwere not the Unit holder of record on a specified Monthly Record Date, you should not use the taxinformation for the month in which that Monthly Record Date falls. A table of Monthly Record Dates andcash distributions per Unit is included on page 4.

The appropriate schedules to be used by a Unit holder will depend upon (i) the date the Unit holderbecame a holder of record of the Units, (ii) if applicable, the date the Unit holder ceased to be the holderof record of the Units, and (iii) the tax year-end of the Unit holder. For instance, a Unit holder reporting onthe calendar year basis who acquired Units and became a Unit holder of record on June 15, 2018 andwho still owned only those Units on December 17, 2018 must use the federal and individual state, whereapplicable, tables to determine their proportionate income and expenses (located on pages 6-13), andDepletion Schedules D-I and D-II or Depletion Schedule D-IV, as appropriate (located on pages 14 and17, respectively) for such Units. However, Unit holders reporting on a calendar year basis who becameUnit holders of record prior to January 16, 2018 and who continued to own only those Units onDecember 17, 2018, can use either the cumulative schedule for calendar year 2018 (located on page 5)or the tables (located on pages 6-13) and Depletion Schedule D-III (located on pages 15 and 16) orDepletion Schedule D-IV (located on page 17), as appropriate. As discussed in more detail herein, Unitholders may be entitled to a deduction for either cost depletion or percentage depletion (but not both),depending upon each Unit holder’s individual facts relating to the ownership of Trust Units.

Applying the Data From the Income and Expense Schedules

Unit holders who must use the separate income and expense tables should read the tables in thefollowing manner: the months on the left-hand side of each table denote the month in which a Unit holderfirst became a Unit holder of record in 2018. Reading across from that month, choose the last month in2018 in which the Unit holder was a holder of record with respect to those Units. Multiply that factor bythe number of Units held for that specific period of time. For example, if Units were purchased on May 1,2018 and held until December 31, 2018, a Unit holder would choose May from the left-hand side of thetable and then choose the factor located under ‘‘December’’ from that row. For a worksheet approach tocomputing a Unit holder’s income and expense amounts, see the Tax Computation Worksheet onpage 22.

(SRT 2018 TAX)

1

Computing Depletion

Depletion schedules are included that provide information for Unit holders to compute costdepletion and percentage depletion deductions with respect to their interests in the Trust. To computecost depletion for any taxable period, Unit holders should multiply the cost depletion factor indicated onthe relevant schedule by their original tax basis in the respective Unit(s) as reduced by the cost depletionand percentage depletion that was allowable as a deduction (whether or not deducted) in prior calendaryears during which they owned the Units.

For your convenience, a simple cost depletion calculator is now available on the Sabine RoyaltyTrust website at: www.sbr-sabine.com, on both the ‘‘Home’’ page and ‘‘Tax Information’’ page.

A factor for percentage depletion is also included on Depletion Schedule D-IV (located on page 17).A Unit holder may be entitled to a percentage depletion deduction, in lieu of a cost depletion deduction,if percentage depletion exceeds cost depletion for any taxable period. To compute percentage depletionfor any taxable period, Unit holders should multiply the appropriate percentage depletion factorindicated on Depletion Schedule D-IV by the number of Units owned by such Unit holder. Unlike costdepletion, percentage depletion is not limited to a Unit holder’s depletable tax basis in the Units. Rather,a Unit holder is entitled to a percentage depletion deduction as long as the applicable Trust propertiesgenerate gross income.

As discussed at page A-2 in the back portion of this booklet, the composite cost depletion factorsare determined on the basis of a weighted average ratio of current production from each Trust propertyto the estimated future production from such property. This method of weighting the cost depletionfactors permits the presentation of a single cost depletion factor for all Unit holders acquiring Unitsduring a period in which there is no substantial change in the relative fair market values of the Trustproperties. Primarily as a result of the decline in oil prices that occurred during 1986, there was a changein the relative fair market values of the Trust properties. Accordingly, two mutually exclusive costdepletion computations are included herein reflecting the composite cost depletion factors required tocompute cost depletion for Units acquired in 1986.

The proper cost depletion schedule to use in computing 2018 cost depletion depends on the datewhen the Units were acquired, as described below. Therefore, Unit holders are encouraged to maintainrecords indicating the date of acquisition and the acquisition price for each Unit or lot of Units acquired.

Unit holders taking a cost depletion deduction who acquired Units before 2018 should useDepletion Schedule D-III (located on pages 15 and 16). The federal cost depletion factors in DepletionSchedule D-III are presented on a cumulative basis for 2018. Depletion Schedule D-III contains no state-specific cost depletion factors. Unit holders should refer to Depletion Schedule D-II (located on page 14)for the state-specific cost depletion factors.

Unit holders who acquired Units in 2018 should use Depletion Schedule D-I (located on page 14).The federal cost depletion factors in Depletion Schedule D-I are presented on a cumulative andnoncumulative basis for 2018. Depletion Schedule D-I contains no state-specific cost depletion factors.Unit holders should refer to Depletion Schedule D-II (located on page 14) for the state-specific costdepletion factors.

Depletion Schedule D-II (located on page 14) contains state-specific cost depletion factors, whichare presented on a noncumulative basis for all years. These factors are appropriate for use in calculatingthe 2018 cost depletion allowance for Units purchased in all years. You may calculate state costdepletion by either (a) calculating the amount of state depletion for each month and adding together themonthly depletion amounts or (b) adding together the applicable monthly depletion factors for therelevant state to create a composite depletion factor for such state and, in both cases, multiplying thatfactor by the adjusted basis of your Units. Both methods should produce the same result.

(SRT 2018 TAX)

2

Asset Sales and Dispositions

There have been no sales or dispositions of Trust assets during the year.

Redemptions

There have been no redemptions of Trust interests during the year.

Sale or Exchange of Units

A discussion concerning the tax consequences associated with the sale or exchange of Units ispresented on pages A-4 to A-5 in the back portion of this booklet.

Classification of Investment

Tax reform measures enacted in 1986 and 1987 require items of income and expense to becategorized as ‘‘passive,’’ ‘‘active’’ or ‘‘portfolio’’ in nature. An explanation of how these rules apply tothe items of income and expense reported by the Trust is on page A-1 in the back portion of this booklet.

Nonresident Foreign Unit Holders

Nonresident alien individual and foreign corporation Unit holders (‘‘Foreign Taxpayer(s)’’) aresubject to special tax rules with respect to their investments in the Trust. These rules are outlined onpages A-3 to A-4 in the back portion of this booklet.

Unrelated Business Taxable Income

Certain organizations that are generally exempt from federal income tax under Internal RevenueCode Section 501 are subject to federal income tax on certain types of business income defined inSection 512 as unrelated business taxable income (‘‘UBTI’’). The income of the Trust as to anytax-exempt organization should not be UBTI so long as the Trust Units are not ‘‘debt-financed property’’within the meaning of Section 514(b) of the Internal Revenue Code. In general, a Trust Unit would bedebt-financed if the Trust incurs debt or if the tax-exempt organization that is a Trust Unit holder incursdebt to acquire a Trust Unit or otherwise incurs or maintains a debt that would not have been incurred ormaintained if the Trust Unit had not been acquired. A real property exception applies to thedebt-financed property rules for certain types of exempt organizations. Consult your tax advisor ifapplicable.

Net Investment Income Tax

Section 1411 of the Code imposes a 3.8% Medicare tax on certain investment income earned byindividuals, estates, and trusts. For these purposes, investment income generally will include a Unitholder’s allocable share of the Trust’s interest and royalty income plus the gain recognized from a sale ofTrust Units. In the case of an individual, the tax is imposed on the lesser of (i) the individual’s netinvestment income from all investments, or (ii) the amount by which the individual’s modified adjustedgross income exceeds specified threshold levels depending on such individual’s federal income taxfiling status ($250,000 for married persons filing a joint return and $200,000 in most other cases). In thecase of an estate or trust, the tax is imposed on the lesser of (i) undistributed net investment income, or(ii) the excess adjusted gross income over the dollar amount at which the highest income tax bracketapplicable to an estate or trust begins ($12,500 for 2018).

(SRT 2018 TAX)

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Backup Withholding

Unit holders, other than Foreign Taxpayers, who have had amounts withheld in 2018 pursuant to thefederal backup withholding provisions should have received a Form 1099-MISC from the Trust. TheForm 1099-MISC reflects the total federal income tax withheld from distributions. Unlike otherForms 1099 that you may receive, the amount reported on the Form 1099-MISC received from the Trustshould not be included as additional income in computing taxable income, as such amount is alreadyincluded in the per-Unit income items on the income and expense schedules included herein. Thefederal income tax withheld, as reported on the Form 1099-MISC, should be considered as a credit bythe Unit holder in computing any federal income tax liability. Individual Unit holders should include theamount of backup withholding in the ‘‘Payments’’ section of the Unit holder’s 2018 Form 1040. For afurther discussion of backup withholding, see page A-5 in the back portion of this booklet. For amountswithheld from Foreign Taxpayers, see pages A-3 to A-4 in the back portion of this booklet.

State Tax

Because the Trust holds royalty interests and receives income that is attributable to propertieslocated in various states, Unit holders may be obligated to file a return and may have a tax liability inthose states in addition to their state of residence. The accompanying tables have been prepared insuch a manner that income and deductions attributable to the various states may be determined by eachUnit holder. State tax matters are more fully discussed on pages A-5 to A-6 in the back portion of thisbooklet.

Table of 2018 Monthly Record Dates and Cash Distributions Per Unit

Unit holders, as reflected in the transfer books of the Trust on a Monthly Record Date, received thefollowing per-Unit cash distributions for 2018. The per-Unit cash distributions reflected below have notbeen reduced by any taxes that may have been withheld from distributions to Foreign Taxpayers or fromdistributions to Unit holders subject to the federal backup withholding rules. The distribution checkswere dated and mailed on the corresponding Date Payable.

DistributionMonthly Record Date Date Payable Per Unit

January 16, 2018 January 30, 2018 0.227020February 14, 2018 February 28, 2018 0.191220March 15, 2018 March 29, 2018 0.210680April 16, 2018 April 30, 2018 0.279340May 15, 2018 May 29, 2018 0.284380June 15, 2018 June 29, 2018 0.294840July 16, 2018 July 30, 2018 0.281180August 15, 2018 August 29, 2018 0.239900September 17, 2018 September 28, 2018 0.262550October 15, 2018 October 29, 2018 0.274080November 15, 2018 November 29, 2018 0.403920December 17, 2018 December 31, 2018 0.399950

(SRT 2018 TAX)

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Cumulative 2018

SABINE ROYALTY TRUSTEIN 75-6297143

FORM 1041, GRANTOR TRUST

Federal and State Income Tax InformationSee Instructions for Use

SECTION IINCOME AND EXPENSE PER UNIT

OTHER INCOMEROYALTY INCOME AND EXPENSE AND EXPENSE

NetGross Severance Royalty Interest Administrative

Source Income Tax Payments Income Expense

Florida . . . . . . . . . . . . . . . . . . . . $0.033670 $0.000833 $0.032837 $ * $0.001637Louisiana . . . . . . . . . . . . . . . . . . 0.042038 0.004278 0.037760 * 0.002050Mississippi . . . . . . . . . . . . . . . . . 0.058849 0.003051 0.055798 * 0.002735New Mexico . . . . . . . . . . . . . . . . 0.166646 0.026263 0.140383 * 0.007763Oklahoma . . . . . . . . . . . . . . . . . 0.563216 0.075009 0.488207 * 0.026534Texas . . . . . . . . . . . . . . . . . . . . . 3.096481 0.334510 2.761971 0.009398 0.136528

TOTAL . . . . . . . . . . . . . . . . . . $3.960900 $0.443944 $3.516956 $0.009398 $0.177247

SECTION IIRECONCILIATION OF CASH DISTRIBUTIONS PER UNIT

Item AMOUNT

1. Total Net Royalty Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.5169562. Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0093983. Administrative Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.177247)

4. Cash Distribution Per Unit ** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.349107

* Revenue attributable to these states was invested and earned interest income. Since theinvestments were made in Dallas, Texas, and the interest was paid there, such interest is included inthe Texas interest income.

** Includes amounts withheld by the Trust from distributions to nonresident alien individuals andforeign corporations and remitted directly to the United States Treasury. This also includes amountswithheld pursuant to the backup withholding provisions.

(SRT 2018 TAX)

5

SABINE ROYALTY TRUST FEDERALTable I: 2018 Gross Royalty Income (Cumulative $ per Unit)

FIRST MONTH IN WHICHUNITS WERE OWNED ON LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018THE MONTHLY RECORD

2018DATE IN 2018

January February March April May June July August September October November December

JANUARY . . . . . . . . . . . . 0.276060 0.506099 0.768775 1.099050 1.421761 1.764409 2.088871 2.372207 2.674386 2.985588 3.477834 3.960900FEBRUARY . . . . . . . . . . . 0.230039 0.492715 0.822990 1.145701 1.488349 1.812811 2.096147 2.398326 2.709528 3.201774 3.684840MARCH . . . . . . . . . . . . . 0.262676 0.592951 0.915662 1.258310 1.582772 1.866108 2.168287 2.479489 2.971735 3.454801APRIL . . . . . . . . . . . . . . 0.330275 0.652986 0.995634 1.320096 1.603432 1.905611 2.216813 2.709059 3.192125MAY . . . . . . . . . . . . . . . 0.322711 0.665359 0.989821 1.273157 1.575336 1.886538 2.378784 2.861850JUNE . . . . . . . . . . . . . . 0.342648 0.667110 0.950446 1.252625 1.563827 2.056073 2.539139JULY . . . . . . . . . . . . . . . 0.324462 0.607798 0.909977 1.221179 1.713425 2.196491AUGUST . . . . . . . . . . . . . 0.283336 0.585515 0.896717 1.388963 1.872029SEPTEMBER . . . . . . . . . . 0.302179 0.613381 1.105627 1.588693OCTOBER . . . . . . . . . . . 0.311202 0.803448 1.286514NOVEMBER . . . . . . . . . . . 0.492246 0.975312DECEMBER . . . . . . . . . . . 0.483066

Table II: 2018 Severance Tax (Cumulative $ per Unit)

FIRST MONTH IN WHICHUNITS WERE OWNED ON LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018THE MONTHLY RECORD

2018DATE IN 2018


JANUARY . . . . . . . . . . . . 0.038035 0.063228 0.087834 0.123686 0.148677 0.179578 0.212293 0.239853 0.267798 0.295756 0.374730 0.443944FEBRUARY . . . . . . . . . . . 0.025193 0.049799 0.085651 0.110642 0.141543 0.174258 0.201818 0.229763 0.257721 0.336695 0.405909MARCH . . . . . . . . . . . . . 0.024606 0.060458 0.085449 0.116350 0.149065 0.176625 0.204570 0.232528 0.311502 0.380716APRIL . . . . . . . . . . . . . . 0.035852 0.060843 0.091744 0.124459 0.152019 0.179964 0.207922 0.286896 0.356110MAY . . . . . . . . . . . . . . . 0.024991 0.055892 0.088607 0.116167 0.144112 0.172070 0.251044 0.320258JUNE . . . . . . . . . . . . . . 0.030901 0.063616 0.091176 0.119121 0.147079 0.226053 0.295267JULY . . . . . . . . . . . . . . . 0.032715 0.060275 0.088220 0.116178 0.195152 0.264366AUGUST . . . . . . . . . . . . . 0.027560 0.055505 0.083463 0.162437 0.231651SEPTEMBER . . . . . . . . . . 0.027945 0.055903 0.134877 0.204091OCTOBER . . . . . . . . . . . 0.027958 0.106932 0.176146NOVEMBER . . . . . . . . . . . 0.078974 0.148188DECEMBER . . . . . . . . . . . 0.069214

(SRT 2018 TAX)

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SABINE ROYALTY TRUST FEDERAL

Table III: 2018 Interest Income (Cumulative $ per Unit)

FIRST MONTH IN WHICHUNITS WERE OWNEDON THE MONTHLYRECORD DATE IN 2018 LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018

2018


JANUARY . . . . . . . . . . 0.000359 0.000788 0.000788 0.001807 0.002533 0.003229 0.004371 0.005199 0.005234 0.006847 0.008085 0.009398FEBRUARY . . . . . . . . . . 0.000429 0.000429 0.001448 0.002174 0.002870 0.004012 0.004840 0.004875 0.006488 0.007726 0.009039MARCH . . . . . . . . . . . . 0.000000 0.001019 0.001745 0.002441 0.003583 0.004411 0.004446 0.006059 0.007297 0.008610APRIL . . . . . . . . . . . . . 0.001019 0.001745 0.002441 0.003583 0.004411 0.004446 0.006059 0.007297 0.008610MAY . . . . . . . . . . . . . . 0.000726 0.001422 0.002564 0.003392 0.003427 0.005040 0.006278 0.007591JUNE . . . . . . . . . . . . . 0.000696 0.001838 0.002666 0.002701 0.004314 0.005552 0.006865JULY . . . . . . . . . . . . . 0.001142 0.001970 0.002005 0.003618 0.004856 0.006169AUGUST . . . . . . . . . . . 0.000828 0.000863 0.002476 0.003714 0.005027SEPTEMBER . . . . . . . . 0.000035 0.001648 0.002886 0.004199OCTOBER . . . . . . . . . . 0.001613 0.002851 0.004164NOVEMBER . . . . . . . . . 0.001238 0.002551DECEMBER . . . . . . . . . 0.001313

Table IV: 2018 Trust Administrative Expense (Cumulative $ per Unit)


2018



(SRT 2018 TAX)

7

SABINE ROYALTY TRUST TEXASTABLE A TEXAS: Gross Royalty IncomeFIRST MONTH IN WHICH UNITS WERE OWNED ON THEMONTHLY RECORD DATE IN 2018 LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018

2018


January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.198179 0.382617 0.577085 0.841639 1.099563 1.365433 1.588144 1.789860 1.995790 2.246590 2.677257 3.096481February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.184438 0.378906 0.643460 0.901384 1.167254 1.389965 1.591681 1.797611 2.048411 2.479078 2.898302March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.194468 0.459022 0.716946 0.982816 1.205527 1.407243 1.613173 1.863973 2.294640 2.713864April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.264554 0.522478 0.788348 1.011059 1.212775 1.418705 1.669505 2.100172 2.519396May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.257924 0.523794 0.746505 0.948221 1.154151 1.404951 1.835618 2.254842June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.265870 0.488581 0.690297 0.896227 1.147027 1.577694 1.996918July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.222711 0.424427 0.630357 0.881157 1.311824 1.731048August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.201716 0.407646 0.658446 1.089113 1.508337September . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.205930 0.456730 0.887397 1.306621October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.250800 0.681467 1.100691November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.430667 0.849891December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.419224

TABLE B TEXAS: Severance TaxFIRST MONTH IN WHICH UNITS WERE OWNED ON THEMONTHLY RECORD DATE IN 2018 LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018

2018



TABLE C TEXAS: Interest IncomeFIRST MONTH IN WHICH UNITS WERE OWNED ON THEMONTHLY RECORD DATE IN 2018 LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018

2018



TABLE D TEXAS: Administrative ExpenseFIRST MONTH IN WHICH UNITS WERE OWNED ON THEMONTHLY RECORD DATE IN 2018 LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018

2018



(SRT 2018 TAX)

8

SABINE ROYALTY TRUST OKLAHOMATABLE A OKLAHOMA: Gross Royalty Income

FIRST MONTH IN WHICHUNITS WERE OWNED ONTHE MONTHLY RECORDDATE IN 2018 LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018

2018


January . . . . . . . . . . . . . 0.054113 0.077478 0.123054 0.161883 0.204666 0.254011 0.325094 0.381347 0.450076 0.484728 0.523301 0.563216February . . . . . . . . . . . . 0.023365 0.068941 0.107770 0.150553 0.199898 0.270981 0.327234 0.395963 0.430615 0.469188 0.509103March . . . . . . . . . . . . . . 0.045576 0.084405 0.127188 0.176533 0.247616 0.303869 0.372598 0.407250 0.445823 0.485738April . . . . . . . . . . . . . . . 0.038829 0.081612 0.130957 0.202040 0.258293 0.327022 0.361674 0.400247 0.440162May . . . . . . . . . . . . . . . 0.042783 0.092128 0.163211 0.219464 0.288193 0.322845 0.361418 0.401333June . . . . . . . . . . . . . . 0.049345 0.120428 0.176681 0.245410 0.280062 0.318635 0.358550July . . . . . . . . . . . . . . . 0.071083 0.127336 0.196065 0.230717 0.269290 0.309205August . . . . . . . . . . . . . 0.056253 0.124982 0.159634 0.198207 0.238122September . . . . . . . . . . . 0.068729 0.103381 0.141954 0.181869October . . . . . . . . . . . . 0.034652 0.073225 0.113140November . . . . . . . . . . . 0.038573 0.078488December . . . . . . . . . . . 0.039915

TABLE B OKLAHOMA: Severance Tax


2018


January . . . . . . . . . . . . . . 0.006261 0.009394 0.015745 0.021385 0.027539 0.034236 0.043940 0.050360 0.057570 0.062656 0.068869 0.075009February . . . . . . . . . . . . . 0.003133 0.009484 0.015124 0.021278 0.027975 0.037679 0.044099 0.051309 0.056395 0.062608 0.068748March . . . . . . . . . . . . . . . 0.006351 0.011991 0.018145 0.024842 0.034546 0.040966 0.048176 0.053262 0.059475 0.065615April . . . . . . . . . . . . . . . . 0.005640 0.011794 0.018491 0.028195 0.034615 0.041825 0.046911 0.053124 0.059264May . . . . . . . . . . . . . . . . 0.006154 0.012851 0.022555 0.028975 0.036185 0.041271 0.047484 0.053624June . . . . . . . . . . . . . . . . 0.006697 0.016401 0.022821 0.030031 0.035117 0.041330 0.047470July . . . . . . . . . . . . . . . . 0.009704 0.016124 0.023334 0.028420 0.034633 0.040773August . . . . . . . . . . . . . . 0.006420 0.013630 0.018716 0.024929 0.031069September . . . . . . . . . . . . 0.007210 0.012296 0.018509 0.024649October . . . . . . . . . . . . . . 0.005086 0.011299 0.017439November . . . . . . . . . . . . 0.006213 0.012353December . . . . . . . . . . . . 0.006140

TABLE C OKLAHOMA: Administrative Expense


2018


January . . . . . . . . . . . . 0.002228 0.003656 0.008408 0.010301 0.012166 0.014701 0.017266 0.020582 0.023247 0.024447 0.025277 0.026534February . . . . . . . . . . . . 0.001428 0.006180 0.008073 0.009938 0.012473 0.015038 0.018354 0.021019 0.022219 0.023049 0.024306March . . . . . . . . . . . . . 0.004752 0.006645 0.008510 0.011045 0.013610 0.016926 0.019591 0.020791 0.021621 0.022878April . . . . . . . . . . . . . . 0.001893 0.003758 0.006293 0.008858 0.012174 0.014839 0.016039 0.016869 0.018126May . . . . . . . . . . . . . . 0.001865 0.004400 0.006965 0.010281 0.012946 0.014146 0.014976 0.016233June . . . . . . . . . . . . . . 0.002535 0.005100 0.008416 0.011081 0.012281 0.013111 0.014368July . . . . . . . . . . . . . . 0.002565 0.005881 0.008546 0.009746 0.010576 0.011833August . . . . . . . . . . . . . 0.003316 0.005981 0.007181 0.008011 0.009268September . . . . . . . . . . 0.002665 0.003865 0.004695 0.005952October . . . . . . . . . . . . 0.001200 0.002030 0.003287November . . . . . . . . . . . 0.000830 0.002087December . . . . . . . . . . . 0.001257

(SRT 2018 TAX)

9

SABINE ROYALTY TRUST FLORIDA

TABLE A FLORIDA: Gross Royalty Income


2018January February March April May June July August September October November December

January . . . . . . . . . . . . 0.002219 0.006087 0.008861 0.011799 0.014403 0.017265 0.019586 0.022461 0.025528 0.028976 0.031069 0.033670February . . . . . . . . . . . 0.003868 0.006642 0.009580 0.012184 0.015046 0.017367 0.020242 0.023309 0.026757 0.028850 0.031451March . . . . . . . . . . . . . 0.002774 0.005712 0.008316 0.011178 0.013499 0.016374 0.019441 0.022889 0.024982 0.027583April . . . . . . . . . . . . . . 0.002938 0.005542 0.008404 0.010725 0.013600 0.016667 0.020115 0.022208 0.024809May . . . . . . . . . . . . . . 0.002604 0.005466 0.007787 0.010662 0.013729 0.017177 0.019270 0.021871June . . . . . . . . . . . . . . 0.002862 0.005183 0.008058 0.011125 0.014573 0.016666 0.019267July . . . . . . . . . . . . . . 0.002321 0.005196 0.008263 0.011711 0.013804 0.016405August . . . . . . . . . . . . 0.002875 0.005942 0.009390 0.011483 0.014084September . . . . . . . . . . 0.003067 0.006515 0.008608 0.011209October . . . . . . . . . . . . 0.003448 0.005541 0.008142November . . . . . . . . . . 0.002093 0.004694December . . . . . . . . . . 0.002601

TABLE B FLORIDA: Severance Tax




TABLE C FLORIDA: Administrative Expense




(SRT 2018 TAX)

10

SABINE ROYALTY TRUST LOUISIANA

TABLE A LOUISIANA: Gross Royalty Income




TABLE B LOUISIANA: Severance Tax




TABLE C LOUISIANA: Administrative Expense




(SRT 2018 TAX)

11

SABINE ROYALTY TRUST MISSISSIPPI

TABLE A MISSISSIPPI: Gross Royalty Income




TABLE B MISSISSIPPI: Severance Tax




TABLE C MISSISSIPPI: Administrative Expense




(SRT 2018 TAX)

12

SABINE ROYALTY TRUST NEW MEXICO

TABLE A NEW MEXICO: Gross Royalty Income




TABLE B NEW MEXICO: Severance Tax




TABLE C NEW MEXICO: Administrative Expense




(SRT 2018 TAX)

13

SABINE ROYALTY TRUSTDepletion Schedule D-I

The cumulative and noncumulative cost depletion factors reflected in Depletion Schedule D-I should be used tocompute 2018 federal cost depletion amounts attributable to Units purchased for which the Unit holder initially becameentitled to distributions in 2018. This schedule should not be used to compute depletion for any other Units owned. (Seeaccompanying information for computation instructions.)

FIRST MONTH IN WHICHUNITS WERE OWNEDON THE MONTHLYRECORD DATE IN 2018 January February March April May June July August September October November December

January . . . . . . . . . . . . 0.010691 0.020009 0.030046 0.042106 0.053587 0.065230 0.075989 0.086560 0.097411 0.108337 0.125451 0.141460February . . . . . . . . . . . — 0.009318 0.019355 0.031415 0.042896 0.054539 0.065298 0.075869 0.086720 0.097646 0.114760 0.130769March . . . . . . . . . . . . . — — 0.010037 0.022097 0.033578 0.045221 0.055980 0.066551 0.077402 0.088328 0.105442 0.121451April . . . . . . . . . . . . . . — — — 0.012060 0.023541 0.035184 0.045943 0.056514 0.067365 0.078291 0.095405 0.111414May . . . . . . . . . . . . . . — — — — 0.011481 0.023124 0.033883 0.044454 0.055305 0.066231 0.083345 0.099354June . . . . . . . . . . . . . . — — — — — 0.011643 0.022402 0.032973 0.043824 0.054750 0.071864 0.087873July . . . . . . . . . . . . . . — — — — — — 0.010759 0.021330 0.032181 0.043107 0.060221 0.076230August . . . . . . . . . . . . — — — — — — — 0.010571 0.021422 0.032348 0.049462 0.065471September . . . . . . . . . . — — — — — — — — 0.010851 0.021777 0.038891 0.054900October . . . . . . . . . . . . — — — — — — — — — 0.010926 0.028040 0.044049November . . . . . . . . . . — — — — — — — — — — 0.017114 0.033123December . . . . . . . . . . — — — — — — — — — — — 0.016009

Depletion Schedule D-II

The non-cumulative cost depletion factors reflected in Depletion Schedule D-II should be used to compute 2018state cost depletion amounts attributable to Units purchased for which the Unit holder initially became entitled todistributions in any year. The applicable number to use is the number related to the last month in which the units wereowned in 2018. (See accompanying information for computation instructions.)

STATE DEPLETIONFACTORS January February March April May June July August September October November December

Florida . . . . . . . . . . . . 0.000160 0.000184 0.000202 0.000141 0.000130 0.000147 0.000112 0.000137 0.000146 0.000150 0.000100 0.000118Louisiana . . . . . . . . . . . 0.000208 0.000159 0.000137 0.000129 0.000141 0.000117 0.000123 0.000196 0.000114 0.000112 0.000153 0.000106Mississippi . . . . . . . . . . 0.000220 0.000197 0.000172 0.000190 0.000178 0.000226 0.000219 0.000197 0.000222 0.000226 0.000193 0.000244New Mexico . . . . . . . . . 0.000463 0.000415 0.000394 0.000550 0.000409 0.000507 0.000631 0.000453 0.000572 0.000441 0.000490 0.000461Oklahoma . . . . . . . . . . 0.002397 0.001119 0.002055 0.001718 0.001988 0.002009 0.002635 0.002548 0.002137 0.001597 0.001446 0.001649Texas . . . . . . . . . . . . . 0.007243 0.007244 0.007077 0.009332 0.008635 0.008637 0.007039 0.007040 0.007660 0.008400 0.014732 0.013431

TOTAL . . . . . . . . . . . 0.010691 0.009318 0.010037 0.012060 0.011481 0.011643 0.010759 0.010571 0.010851 0.010926 0.017114 0.016009

(SRT 2018 TAX)

14

SABINE ROYALTY TRUSTDepletion Schedule D-III

The cumulative federal cost depletion factors reflected in Depletion Schedule D-III should be used to compute 2018federal cost depletion amounts attributable to Units purchased for which the Unit holder initially became entitled todistributions in the year stated. For depletion factors relating to the individual states, please use Depletion Schedule D-IIon page 14. (See accompanying information for computation instructions.)

For a Unitacquired ofrecord duringthe year of: LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018


Original Distribution . . . . . . . . . . .010729 .020186 .030239 .042485 .054147 .066006 .076788 .087368 .098330 .109529 .127211 .143829

1983 . . . . . . . . . . . . . . . . . . . .009436 .018183 .027213 .038590 .049296 .060065 .069439 .078715 .088497 .098773 .115906 .131733

1984 . . . . . . . . . . . . . . . . . . . .005908 .011412 .017076 .024228 .030955 .037715 .043568 .049372 .055499 .061960 .072778 .082762

1985 . . . . . . . . . . . . . . . . . . . .007943 .015369 .022984 .032624 .041676 .050784 .058662 .066459 .074715 .083424 .098003 .111458

Before March 17, 1986 . . . . . . . . . .006256 .012125 .018129 .025748 .032895 .040081 .046282 .052420 .058929 .065807 .077352 .087997

After March 17, 1986 . . . . . . . . . . .004801 .009304 .013910 .019756 .025235 .030750 .035514 .040224 .045222 .050499 .059349 .067509

1987 . . . . . . . . . . . . . . . . . . . .006642 .012865 .019239 .027313 .034887 .042510 .049095 .055612 .062520 .069810 .082026 .093292

1988 . . . . . . . . . . . . . . . . . . . .007243 .013953 .020890 .029614 .037822 .046081 .053279 .060398 .067905 .075782 .088898 .101016

1989 . . . . . . . . . . . . . . . . . . . .007038 .013454 .020173 .028523 .036418 .044367 .051379 .058311 .065570 .073124 .085549 .097069

1990 . . . . . . . . . . . . . . . . . . . .006665 .012741 .019107 .027010 .034475 .041998 .048648 .055214 .062093 .069238 .080963 .091833

1991 . . . . . . . . . . . . . . . . . . . .006260 .011904 .017856 .025205 .032133 .039146 .045455 .051630 .058095 .064725 .075448 .085411

1992 . . . . . . . . . . . . . . . . . . . .007501 .014060 .021139 .029752 .037935 .046221 .053843 .061281 .068977 .076749 .089123 .100674

1993 . . . . . . . . . . . . . . . . . . . .007686 .014438 .021710 .030523 .038879 .047357 .055154 .062761 .070649 .078605 .091193 .102951

1994 . . . . . . . . . . . . . . . . . . . .006829 .012799 .019275 .027026 .034407 .041890 .048778 .055534 .062499 .069520 .080532 .090846

1995 . . . . . . . . . . . . . . . . . . . .007449 .013945 .021040 .029394 .037365 .045466 .052951 .060309 .067877 .075473 .087177 .098188

1996 . . . . . . . . . . . . . . . . . . . .007316 .013465 .020375 .028360 .036048 .043865 .051286 .058558 .065929 .073185 .084133 .094494

1997 . . . . . . . . . . . . . . . . . . . .010019 .018675 .028194 .039363 .050046 .060898 .070986 .080901 .091056 .101205 .116798 .131477

1998 . . . . . . . . . . . . . . . . . . . .010786 .020067 .030275 .042265 .053745 .065417 .076292 .086970 .097896 .108809 .125544 .141324

1999 . . . . . . . . . . . . . . . . . . . .010915 .020375 .030647 .042849 .054487 .066334 .082742 .093529 .104607 .115710 .132831 .148941

2000 . . . . . . . . . . . . . . . . . . . .010791 .020147 .030269 .042282 .053713 .065412 .076327 .086974 .097947 .108913 .125622 .141407

2001 . . . . . . . . . . . . . . . . . . . .011061 .020066 .030228 .041835 .053013 .064534 .075909 .086902 .097964 .108574 .123768 .138331

2002 . . . . . . . . . . . . . . . . . . . .010968 .020316 .030596 .042522 .053879 .065556 .076704 .087536 .098626 .109494 .125530 .140752

2003 . . . . . . . . . . . . . . . . . . . .010938 .020201 .030423 .042340 .053728 .065410 .076552 .087378 .098440 .109309 .125484 .140837

(SRT 2018 TAX)

15

SABINE ROYALTY TRUSTDepletion Schedule D-III

The cumulative federal cost depletion factors reflected in Depletion Schedule D-III should be used to compute 2018federal cost depletion amounts attributable to Units purchased for which the Unit holder initially became entitled todistributions in the year stated. For depletion factors relating to the individual states, please use Depletion Schedule D-IIon page 14. (See accompanying information for computation instructions.)

For a Unitacquired ofrecord duringthe year of: LAST MONTH IN WHICH UNITS WERE OWNED ON THE MONTHLY RECORD DATE IN 2018


2004 . . . . . . . . . . . . . . . . . . . .010691 .019987 .030039 .041931 .053219 .064782 .075593 .086131 .097001 .107833 .124267 .139776

2005 . . . . . . . . . . . . . . . . . . . .010915 .020257 .030509 .042476 .053899 .065600 .076658 .087442 .098487 .109407 .125751 .141240

2006 . . . . . . . . . . . . . . . . . . . .010694 .019910 .029936 .041772 .053026 .064547 .075397 .085959 .096815 .107579 .123867 .139241

2007 . . . . . . . . . . . . . . . . . . . .010298 .019358 .029081 .040718 .051688 .062904 .073312 .083458 .093974 .104505 .120681 .135875

2008 . . . . . . . . . . . . . . . . . . . .009998 .018828 .028260 .039577 .050275 .061200 .071278 .081121 .091331 .101608 .117509 .132427

2009 . . . . . . . . . . . . . . . . . . . .010082 .018822 .028253 .039508 .050219 .061143 .071325 .081283 .091514 .101754 .117507 .132327

2010 . . . . . . . . . . . . . . . . . . . .010227 .019224 .028795 .040343 .051295 .062437 .072698 .082776 .093162 .103649 .120015 .135334

2011 . . . . . . . . . . . . . . . . . . . .010052 .018961 .028367 .039808 .050612 .061621 .071736 .081631 .091887 .102262 .118521 .133714

2012 . . . . . . . . . . . . . . . . . . . .010175 .019277 .028865 .040548 .051557 .062764 .072979 .082984 .093395 .103981 .120689 .136272

2013 . . . . . . . . . . . . . . . . . . . .010255 .019389 .029005 .040682 .051710 .062933 .073192 .083274 .093713 .104308 .120935 .136456

2014 . . . . . . . . . . . . . . . . . . . .010236 .019326 .028948 .040572 .051560 .062747 .072999 .083068 .093487 .104035 .120521 .135929

2015 . . . . . . . . . . . . . . . . . . . .010451 .019628 .029439 .041245 .052435 .063832 .074361 .084667 .095308 .106021 .122688 .138302

2016 . . . . . . . . . . . . . . . . . . . .010535 .019798 .029697 .041623 .052935 .064441 .075032 .085421 .096140 .106960 .123865 .139689

2017 . . . . . . . . . . . . . . . . . . . .010627 .019887 .029865 .041845 .053249 .064815 .075508 .086015 .096797 .107650 .124630 .140516

(SRT 2018 TAX)

16

SABINE ROYALTY TRUST

Depletion Schedule D-IV

The noncumulative and cumulative depletion factors reflected in Depletion Schedule D-IV should be used tocompute 2018 Federal percentage depletion amounts attributable to Units purchased for which the Unit holder initiallybecame entitled to distributions in any year. (See accompanying information for computation instructions.)

FIRST MONTH IN WHICHUNITS WERE OWNEDON THE MONTHLYRECORD DATE IN 2018 January February March April May June July August September October November December


(SRT 2018 TAX)

17

30JAN201917565373

18

23JAN201912223915

19

16JAN201909120457

20

23JAN201912223401

21

SABINE ROYALTY TRUSTTAX COMPUTATION WORKSHEET

2018(RETAIN THIS WORKPAPER AS PART OF YOUR PERMANENT TAX RECORDS)

Part I

INCOME AND EXPENSE

A B CIncome/Expense

Per UnitNumber of from Appropriate

Units Owned Schedule(s) Where to Reflect onItem (Note 1) (Note 2) Totals 2018 Form 1040 (Note 3)

Gross Royalty Income . . . . . . . . . � � Line 4, Part I, Schedule E

Severance Tax . . . . . . . . . . . . . . � � Line 16, Part I, Schedule E

Interest Income . . . . . . . . . . . . . � � Line 1, Part I, Schedule B

Administrative Expense . . . . . . . . � � Line 19, Part I, Schedule E

Part II

COST DEPLETION (Note 4)

Cost DepletionAllowable in Prior Adjusted Basis for Appropriate 2018

Calendar Years Cost Depletion Cost Depletion FactorOriginal Basis (Note 5) Purposes (Note 4) 2018 Cost Depletion

� � � �

*Reflect cost depletion on 2018 Form 1040, line 18, Part 1, Schedule E (Note 3).

Part III

COMPUTATION OF GAIN OR (LOSS) FOR UNITS SOLD

Where to Reflect onNet Sales Adjusted Basis 2018 Form 1040

Price (Note 6) Gain (Loss) (Note 3)

Form 4797Part III, Lines 19-24

� � and Schedule D

Notes

(1) In order to correctly calculate total income and expense to be reported on your 2018 federal and, if applicable, state tax returns, it isrecommended that you reproduce and complete a separate Tax Computation Worksheet for each block of Units acquired anddisposed of at different times, as different factors apply depending on when Units were acquired or disposed of. If more than one TaxComputation Worksheet is required, the separate amounts from each Tax Computation Worksheet should be added together andthose aggregate numbers reported on your 2018 income tax returns.

(2) If you did not become a Unit holder of record of any Unit(s) or did not cease to be a Unit holder of record of any Unit(s) during theperiod from January 16, 2018 through December 17, 2018, then the amounts reflected on the cumulative schedule for 2018 (locatedon page 5) should be used to complete Part I. See Comprehensive Example 1 on page 23. If any Units were held of record for onlypart of the period defined above, then the appropriate federal income and expense factors for Part I can be determined by usingTables I-IV (on pages 6 and 7) by locating the factor at the intersection of the first and last month in which the Units were owned by theUnit holder on the Monthly Record Date in 2018. See Comprehensive Examples 2 and 3 on pages 24 and 25 for further explanation.The appropriate state income and expense factors can be determined by using the state tables in the same manner, which arelocated on pages 8 through 13.

(3) The Trustee believes that individual Unit holders owning the Units as an investment should report the amounts determined in thismanner. See Sample Tax Forms on pages 18-21. The U.S. Corporation Income Tax Return (Form 1120) does not require that royaltyincome and related expenses be separately identified on any specific schedules. See ‘‘Sale or Exchange of Units’’ on pages A-4 toA-5 for a discussion of the tax consequences resulting from the sale of a Unit.

(4) The appropriate depletion schedule(s) to be utilized depends on when the Units were acquired. See ‘‘Computing Depletion’’ onpages 2 to 3 to determine the proper schedule(s) to be used. This worksheet assumes a Unit holder will take the cost depletiondeduction. Some Unit holders may be entitled to a percentage depletion deduction in lieu of a cost depletion deduction, in whichcase Depletion Schedule D-IV (on page 17) should be used to compute such Unit holder’s depletion deduction for purposes of Part IIof this worksheet. See pages 2-3 and A-2 - A-3 of this booklet for additional information regarding depletion deductions.

(5) Cost depletion allowable in prior calendar years cannot be computed from the schedules contained in this booklet. Depletionschedules contained in Sabine Royalty Trust Tax Information Booklet(s) from prior years should be used to determine the appropriatecost depletion amount(s) allowable in prior calendar years.

(6) The adjusted basis is equal to the cost or other basis of the Unit(s) less the cost depletion allowable from the date of acquisitionthrough the date of sale (whether or not deducted).

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COMPREHENSIVE EXAMPLE 1

The following example illustrates the computations necessary for an individual to determine incomeand expense attributable to Units acquired in March of 1984 and held throughout 2018.

COMPUTATION OF INCOME AND EXPENSE FOR UNITS OWNED ON ALL MONTHLY RECORDDATES IN 2018



Part I

INCOME AND EXPENSE

A B CIncome/Expense

Per UnitNumber of from Appropriate


Gross Royalty Income . . . . . . 100 � $3.960900 � $396.09 Line 4, Part I, Schedule E

Severance Tax . . . . . . . . . . . 100 � $ .443944 � $ 44.39 Line 16, Part I, Schedule E

Interest Income . . . . . . . . . . 100 � $ .009398 � $ .94 Line 1, Part I, Schedule B

Administrative Expense . . . . . 100 � $ .177247 � $ 17.72 Line 19, Part I, Schedule E

Part IICOST DEPLETION (Note 4)

Cost Depletion Appropriate 2018Allowable in Prior Adjusted Basis for Cost Depletion Factor

Assumed Calendar Years Cost Depletion per DepletionOriginal Basis* (Notes 4 and 5) Purposes Schedule D-III 2018 Cost Depletion**

$2,100.00 � $2,069.20 � $30.80 � .082762 � $2.55

*This number is used for example purposes only. Each Unit holder’s basis is unique to that specific Unit holder.

**Reflect cost depletion on 2018 Form 1040, line 18, Part 1, Schedule E (Note 3).

See Page 22 for Applicable Notes.

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The following example illustrates the computations necessary for an individual to determine incomeand expenses and gain or loss on Units acquired in 1984 and disposed of during 2018. The factors in thisexample are located at the intersection of January and March on the appropriate tables (i.e., the first andlast month of 2018 in which Units were owned on Monthly Record Dates).

Acquisition Units Original Sales Units SalesDate Acquired Basis Date Sold Price

03-21-84 100 $2,100.00 04-3-18 100 $4,270.00

COMPUTATION OF INCOME AND EXPENSE FOR UNITS SOLD IN 2018



Part I

INCOME AND EXPENSE

A B CIncome/Expense Per Unit

Number of from AppropriateUnits Owned Schedule(s) Where to Reflect on

Item (Note 1) (Note 2) Totals 2018 Form 1040 (Note 3)Gross Royalty Income . . . . . . . 100 � $.768775 � $76.88 Line 4, Part I, Schedule E

Severance Tax . . . . . . . . . . . . 100 � $.087834 � $ 8.78 Line 16, Part I, Schedule E

Interest Income . . . . . . . . . . . 100 � $.000788 � $ .08 Line 1, Part I, Schedule B

Administrative Expense . . . . . . 100 � $.052799 � $ 5.28 Line 19, Part I, Schedule E

Part II

COST DEPLETION (Notes 4 and 5)


Assumed Calendar Years Cost Depletion per DepletionOriginal Basis* (Note 5) Purposes Schedule D-III 2018 Cost Depletion**

$2,100.00 � $2,069.20 � $30.80 � .017076 � $.53


**Reflect cost depletion on 2018 Form 1040, line 18, Part 1, Schedule E (Note 3).

Part III


Where to Reflect onNet Sales Adjusted Basis Gain 2018 Form 1040

Price (Note 6) (Loss) (Note 3)Form 4797,

Part III, Lines 19-24$4,270.00 � $30.27 � $4,239.73 and Schedule D


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The following example illustrates the computations necessary for an individual to determine incomeand expenses and gain or loss on Units acquired and disposed of during 2018. The factors in thisexample are located at the intersection of April and September on the appropriate tables (i.e., the firstand last month of 2018 in which Units were owned on monthly Record Dates).

Acquisition Units Original Sales UnitsDate Acquired Basis Date Sold Sales Price

03-23-18 100 $4,100.00 09-28-18 100 $4,300.00

COMPUTATION OF INCOME AND EXPENSE FOR UNITS SOLD IN 2018


2018

(RETAIN THIS WORKPAPER AS PART OF YOUR PERMANENT TAX RECORDS)

Part I

INCOME AND EXPENSE

A B C

Income/Expense Per UnitNumber of from Appropriate


Gross Royalty Income . . . . . . . 100 � $1.905611 � $190.56 Line 4, Part I, Schedule E

Severance Tax . . . . . . . . . . . . 100 � $ .179964 � $ 18.00 Line 16, Part I, Schedule E

Interest Income . . . . . . . . . . . 100 � $ .004446 � $ .44 Line 1, Part I, Schedule B

Administrative Expense . . . . . . 100 � $ .087874 � $ 8.79 Line 19, Part I, Schedule E

Part II

COST DEPLETION (Notes 4 and 5)


Assumed Calendar Years Cost Depletion per DepletionOriginal Basis* (Note 5) Purposes Schedule D-I 2018 Cost Depletion**

$4,100.00 � $0.00 � $4,100.00 � .067365 � $276.20


**Reflect cost depletion on 2018 Form 1040, line 18, Part 1, Schedule E (Notes 4 and 5).

Part III


Where to Reflect onNet Sales Adjusted Basis Gain 2018 Form 1040

Price (Note 6) (Loss) (Note 3)Form 4797,

Part II, Line 10$4,300.00 � $3,823.80 � $476.20 and Schedule D


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SABINE ROYALTY TRUST HISTORICAL TAX WORKSHEET

WINDFALL NET MISC. NETGROSS PROFIT SEVERANCE ROYALTY INTEREST ADMIN. INCOME/ CASHINCOME TAX TAX PMTS INCOME EXPENSE EXPENSE DISTRIB

1983 . . . . 2.721361 0.316613 0.155445 2.249303 0.019377 0.086800 0.000000 2.1818801984 . . . . 3.496106 0.323679 0.196022 2.976405 0.031846 0.155652 0.000000 2.8525991985 . . . . 2.853378 0.190767 0.171256 2.491355 0.021277 0.169099 -0.005487 2.3380461986 . . . . 1.807003 0.041149 0.114513 1.651341 0.012242 0.184580 0.005487 1.4844901987 . . . . 1.648950 0.000209 0.095558 1.553183 0.010601 0.127094 0.000000 1.4366901988 . . . . 1.556021 0.000077 0.101561 1.454383 0.010753 0.098526 0.000000 1.3666101989 . . . . 1.594196 0.000028 0.131330 1.462838 0.013627 0.096295 0.000000 1.3801701990 . . . . 1.748059 0.000000 0.155821 1.592238 0.014058 0.075026 0.000000 1.5312701991 . . . . 1.810596 0.000000 0.188955 1.621641 0.010622 0.084643 0.000000 1.5476201992 . . . . 1.556025 0.000000 0.132087 1.423938 0.005520 0.135228 0.000000 1.2942301993 . . . . 1.751674 0.000000 0.126197 1.625477 0.005316 0.169163 0.000000 1.4616301994 . . . . 1.422338 0.000000 0.094300 1.328038 0.005172 0.135390 0.000000 1.1978201995 . . . . 1.257833 0.000000 0.086219 1.171614 0.007424 0.151878 0.000000 1.0271601996 . . . . 1.650891 0.000000 0.102044 1.548847 0.009748 0.187465 0.000000 1.3711301997 . . . . 1.955335 0.000000 0.144324 1.811011 0.010812 0.177263 0.000000 1.6445601998 . . . . 1.937789 0.000000 0.123769 1.814020 0.011159 0.171521 0.000000 1.6536581999 . . . . 1.663391 0.000000 0.115700 1.547691 0.008112 0.148838 0.000000 1.4069652000 . . . . 2.586743 0.000000 0.157354 2.429389 0.016044 0.170794 0.000000 2.2746392001 . . . . 3.240755 0.000000 0.210965 3.029790 0.014627 0.183788 0.000000 2.8606292002 . . . . 2.175093 0.000000 0.125845 2.049248 0.003150 0.173568 0.000000 1.8788302003 . . . . 2.930078 0.000000 0.214244 2.715834 0.003272 0.196541 0.000000 2.5225652004 . . . . 3.277066 0.000000 0.271605 3.005461 0.003421 0.222941 0.000000 2.7859412005 . . . . 3.874801 0.000000 0.304563 3.570238 0.011804 0.150250 0.000000 3.4317922006 . . . . 4.733425 0.000000 0.376823 4.356602 0.024294 0.144170 0.000000 4.2367262007 . . . . 4.334040 0.000000 0.361711 3.972329 0.023849 0.145689 0.000000 3.8504892008 . . . . 6.587048 0.000000 0.421450 6.165598 0.020735 0.150146 0.000000 6.0361872009 . . . . 3.162408 0.000000 0.218949 2.943459 0.001744 0.153550 0.000000 2.7916532010 . . . . 4.153492 0.000000 0.308146 3.845346 0.000306 0.141111 0.000000 3.7045412011 . . . . 4.436046 0.000000 0.325610 4.110436 0.000442 0.144662 0.000000 3.9662162012 . . . . 4.202320 0.000000 0.345350 3.856970 0.000538 0.156560 0.000000 3.7009482013 . . . . 4.375012 0.000000 0.313302 4.061710 0.000727 0.145937 0.000000 3.9165002014 . . . . 4.714152 0.000000 0.453105 4.261047 0.000306 0.163512 0.000000 4.0978412015 . . . . 3.832441 0.000000 0.513743 3.318698 0.000134 0.213553 0.000000 3.1052792016 . . . . 2.465843 0.000000 0.345994 2.119849 0.000512 0.186268 0.000000 1.9340932017 . . . . 2.907278 0.000000 0.368102 2.539176 0.002629 0.173375 0.000000 2.3684302018 . . . . 3.960900 0.000000 0.443944 3.516956 0.009398 0.177247 0.000000 3.349107

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SABINE ROYALTY TRUSTDISCUSSION OF TAX CONSIDERATIONS PERTAINING TO THE

OWNERSHIP OF UNITS IN SABINE ROYALTY TRUST

The tax law requires individuals, estates, trusts, closely held C corporations and personal servicecorporations to categorize income and expense into one of three classes, ‘‘active,’’ ‘‘portfolio’’ or‘‘passive,’’ based upon the nature of the activity and the involvement of the taxpayer in such activity.Because the Trust is a grantor trust, the Unit holders are deemed to hold the investment in the royaltyinterests directly and the proper classification of the Trust income and expense will be dependent uponthe relevant facts and circumstances of each Unit holder. Generally, income or loss resulting from aninterest in the Trust is properly classified as portfolio income and as such can be reported as directed onthe tax computation worksheet (page 22). However, under certain limited circumstances a different taxclassification may be appropriate. Accordingly, Unit holders should consult their own tax advisorregarding all tax compliance matters related to the Units.

Tax Background and WHFIT Information

The Trust was established by the Sabine Corporation Royalty Trust Agreement (the ‘‘TrustAgreement’’), made and entered into effective as of December 31, 1982, to receive a distribution fromSabine Corporation (‘‘Sabine’’) of royalty and mineral interests, including landowner’s royalties,overriding royalty interests, minerals (other than executive rights, bonuses and delay rentals),production payments and any other similar, nonparticipatory interests, in certain producing and provedundeveloped oil and gas properties located in Florida, Louisiana, Mississippi, New Mexico, Oklahomaand Texas.

Sabine received a private letter ruling from the Internal Revenue Service, dated May 2, 1983 (the‘‘Ruling’’), concerning certain tax considerations relevant to the creation and continued existence of theTrust. Pursuant to the Ruling, the Trust is classified for federal income tax purposes as a ‘‘grantor trust’’and not as an association taxable as a corporation. A grantor trust is not subject to federal income tax.Instead, its beneficiaries (the Unit holders in the case of the Trust) are generally considered to own thetrust’s income and principal as though no trust were in existence. A grantor trust files an informationreturn reflecting all items of income and/or deductions that will be included in the returns of thebeneficiaries. Accordingly, each Unit holder of the Trust is taxable on his pro rata share of the Trust’sincome and/or deductions.

The income received or accrued and the deductions paid or incurred by the Trust are deemed to bereceived or accrued and paid or incurred, respectively, by each Unit holder at the same time as the Trust,which is on each Monthly Record Date. On the basis of both the Trust Agreement and the escrowagreement (discussed below), both cash and accrual basis Unit holders should be treated as realizingincome and incurring expenses only on the Monthly Record Dates.

Some Trust Units are held by middlemen, as such term is broadly defined in U.S. TreasuryRegulations (and includes custodians, nominees, certain joint owners, and brokers holding an interestfor a customer in street name, referred to herein collectively as ‘‘middlemen’’). Therefore, the Trusteeconsiders the Trust to be a non-mortgage widely held fixed investment trust (‘‘WHFIT’’) for U.S. federalincome tax purposes. Simmons Bank, EIN: 71-0407808, 2911 Turtle Creek Blvd, Ste. 850, Dallas,Texas, 75219, telephone number 1-855-588-7839, email address [email protected], is therepresentative of the Trust that will provide tax information in accordance with applicable U.S. TreasuryRegulations governing the information reporting requirements of the Trust as a WHFIT. Tax information isalso posted by the Trustee at www.sbr-sabine.com. Notwithstanding the foregoing, the middlemenholding Trust Units on behalf of Unit holders, and not the Trustee of the Trust, are solely responsible forcomplying with the information reporting requirements under the U. S. Treasury Regulations with respect

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to such Trust Units, including the issuance of IRS Forms 1099 and certain written tax statements. Unitholders whose Trust Units are held by middlemen should consult with such middlemen regarding theinformation that will be reported to them by the middlemen with respect to the Trust Units.

Effect of Escrow Arrangement

The assets of the Trust include royalty and mineral interests in certain producing and provedundeveloped oil and gas properties (the ‘‘Properties’’), which constitute economic interests in grossproduction of oil, gas and other minerals free of the costs of production. The Properties are located in sixstates and were not carved out of any of Sabine’s working interests in effecting the distribution. In orderto facilitate the administration of the Trust and to avoid the expense and inconvenience of daily reportingto Unit holders, the Properties are subject to an escrow agreement, for which the Trustee currentlyserves as escrow agent.

Pursuant to the terms of the escrow agreement and the conveyances of the Properties by Sabine,the proceeds of production from the Properties for each calendar month, and interest thereon, arecollected by the escrow agent and are paid to and received by the Trust only on the next Monthly RecordDate. The escrow agent has agreed to endeavor to assure that it incurs and pays expenses for eachcalendar month only on the Monthly Record Date. The Trust Agreement also provides that the Trustee isto endeavor to assure that income of the Trust will be accrued and received and that expenses of theTrust will be incurred and paid only on each Monthly Record Date. Assuming the escrow arrangement isrespected for federal income tax purposes and the Trustee, as escrow agent, is able to control the timingof income and expenses, as stated above, both cash and accrual basis Unit holders will be treated asrealizing income and incurring expenses only on each Monthly Record Date. The Trustee is treating theescrow arrangement as effective for tax purposes and the accompanying tax information has beenpresented accordingly.

If the escrow arrangement is not respected for federal income tax purposes, a mismatching ofincome and deductions could occur between a transferor and a transferee upon the sale or exchange ofUnits. In addition, the Trustee would be required to report the proceeds from production, interest incomethereon, and any deductions to the Unit holders on a daily basis, resulting in a substantial increase in theadministrative expenses of the Trust.

Depletion

Cost Depletion

Pursuant to the Ruling, each Unit holder is entitled to deduct cost depletion with respect to his prorata interest in the Properties. A Unit holder’s cost depletion deduction is computed by reference to theUnit holder’s adjusted basis in each of his Units.

The deduction for cost depletion must be computed by a Unit holder with respect to each separateproperty in the Trust. A Unit holder’s tax basis in each separate property generally must be determined atthe time each Unit is acquired by allocating such Unit holder’s cost in each Unit among all properties inthe Trust based on their relative fair market values. However, a corporate Unit holder that acquired Unitsin the distribution from Sabine must determine its tax basis in each separate property in the Trust at thetime of the distribution by reference to Sabine’s tax basis in each separate property included in thedistribution. The cost depletion deduction attributable to each separate property is calculated for ataxable year by multiplying the tax basis of the property times the appropriate factor reported herein. Thefactors are derived by dividing total estimated equivalent units of production (barrels of oil and MCF’s ofgas) expected to be recovered from the property as of the beginning of the taxable year by the number ofequivalent units produced and sold from such property during the taxable year. The resulting deductionfor cost depletion cannot exceed the adjusted tax basis in the property. The composite depletion factorspresented herein were derived in a manner that encompasses this separate property concept.

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Percentage Depletion

The Revenue Reconciliation Act of 1990 repealed the rules denying percentage depletion to atransferee of a proven oil or gas property for transfers after October 11, 1990. Because substantially all ofthe properties were ‘‘proven properties’’ on the date of the original distribution, the percentage depletiondeduction has limited applicability to Unit holders who became Unit holders prior to October 12, 1990.

A computation of percentage depletion has been made with respect to the post October 11, 1990transfers. For some Unit holders, percentage depletion may exceed cost depletion. In such case, a Unitholder is entitled to a percentage depletion deduction in lieu of a cost depletion deduction. Percentagedepletion will continue to be computed and compared to cost depletion on an annual basis for Unitholders that acquired their Units via applicable transfers occurring after October 11, 1990.

Adjustment to Basis

Each Unit holder should reduce his tax basis (but not below zero) in the Properties (andcorrespondingly, his Units) (i) by the amount of cost depletion and percentage depletion allowable withrespect to the Properties and (ii) by the amount of any return of capital.

Non-Passive Activity Income, Credits and Loss

The income and expenses of the Trust will not be taken into account in computing the passiveactivity losses and income under Section 469 of the Code for a Unit holder who acquires and holds Unitsas an investment and not in the ordinary course of a trade or business.

Revenue/Expense and Depletion Calculators

For your convenience, simple revenue/expense and cost depletion calculators are now available onthe Sabine Royalty Trust website at: www.sbr-sabine.com, on both the ‘‘Home’’ page and the ‘‘TaxInformation’’ page.

Nonresident Foreign Unit Holders

Nonresident alien individual and foreign corporation Unit holders (‘‘Foreign Taxpayer(s)’’), ingeneral, are subject to tax on the gross income attributable to the Trust at a rate equal to 30 percent (orthe lower rate under any applicable treaty) without any deductions. This 30 percent tax applies to U.S.source income that is not effectively connected with a U.S. trade or business. Different tax rates and rulesapply to income effectively connected with a U.S. trade or business, and those rules are not discussedherein. The 30 percent tax is withheld by the Trust and remitted directly to the United States Treasury.Foreign Taxpayers who have had tax withheld in 2018 should have received a Form 1042-S from theTrust. The Form 1042-S will reflect the total federal income tax withheld from distributions. To avoiddouble inclusion, the amount reported on the Form 1042-S should not be included as additional incomein computing taxable income, as such amount is already included in the per-Unit income items on theincome and expense schedules included herein. The federal income tax withheld, as reported on theForm 1042-S, should be considered as a credit by the Unit holder in computing any federal income taxliability.

A Foreign Taxpayer holding income producing real property may elect to treat the income from suchreal property as effectively connected with the conduct of a United States trade or business. Asdiscussed above, different tax rates and rules apply to Foreign Taxpayers with income effectivelyconnected with a U.S. trade or business and those rules are not discussed in detail herein. The incomeattributable to the Properties is considered income produced from real property. Therefore, this electionshould be available to Foreign Taxpayers with respect to the taxable income resulting from theownership of Units. A Unit holder so electing is entitled to claim all deductions with respect to such

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income but must file a United States income tax return to claim such deductions. In the case of a ForeignTaxpayer that is a foreign corporation, a ‘‘branch profits tax’’ may be imposed at a 30 percent rate (or alower rate under an applicable treaty). This election, once made, is generally irrevocable unless anapplication for revocation is approved by the Internal Revenue Service or an applicable treaty allows theelection to be made periodically.

Pursuant to the Foreign Investment in Real Property Tax Act of 1980, as amended (‘‘FIRPTA’’), aforeign taxpayer is subject to U.S. income tax with respect to the sale, transfer, or disposition of a UnitedStates real property interest. FIRPTA generally treats interests in trusts owning United States realproperty as United States real property interests. However, Foreign Taxpayers with a 5% or less interestin the Trust are not considered to hold U.S. real property interests with respect to the Units because theUnits are publicly traded. If the FIRPTA provisions apply because a Foreign Taxpayer holds a greaterthan 5% interest in the Trust, income tax is required to be withheld from any proceeds distributed toForeign Taxpayers at the rate of 15% of the amount realized by Foreign Taxpayers upon the sale,exchange or other disposition of a Unit. In addition, distributions, if any, that represent the ForeignTaxpayer’s allocable share of gain realized upon the sale, exchange or other disposition of United Statesreal property interest by the Trust will generally be subject to withholding tax at a 35% rate. The federalincome tax withheld under FIRPTA should be considered a credit by the Foreign Taxpayer in computingany federal income tax liabilities.

In order to avoid withholding under FIRPTA, Foreign Taxpayers will be required to furnish theapplicable withholding agent with an exemption certificate certifying why such withholding is notrequired.

Pursuant to the Foreign Account Tax Compliance Act (commonly referred to as ‘‘FATCA’’),distributions from the Trust to ‘‘foreign financial institutions’’ and certain other ‘‘non-financial foreignentities’’ may be subject to U.S. withholding taxes. Specifically, certain ‘‘withholdable payments’’(including certain royalties, interest and other gains or income from U.S. sources) made to a foreignfinancial institution or non-financial foreign entity will generally be subject to the withholding tax unlessthe foreign financial institution or non-financial foreign entity complies with certain information reporting,withholding, identification, certification and related requirements imposed by FATCA. Foreign financialinstitutions located in jurisdictions that have an intergovernmental agreement with the United Statesgoverning FATCA may be subject to different rules.

According to Treasury Department guidance, the FATCA withholding rules described abovegenerally will apply to qualifying payments made after June 30, 2014. Foreign Unit holders areencouraged to consult their own tax advisors regarding the possible implications of these withholdingprovisions on their investment in Trust Units.

Foreign Taxpayers are encouraged to consult their own tax advisors concerning the taxconsequences of their investment in the Trust.

Sale or Exchange of Units

Generally, a Unit holder realizes gain or loss upon the sale or exchange of any Unit measured by thedifference between the amount realized from the sale or exchange and the adjusted tax basis of suchUnit. The adjusted tax basis of a Unit is the original basis of such Unit reduced by depletion deductionsallowable (whether deducted or not) with respect to such Unit and by any purchase price adjustmentthat constitutes a return of capital. Trust income allocable to such Unit is taxable to the selling Unit holderuntil the date of sale. The purchaser of a Unit is taxable on Trust income allocable to such Unit from thedate of purchase forward. For federal income tax purposes, Trust income should generally be allocableonly to the holder of record of a Unit on each Monthly Record Date.

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For federal income tax purposes, the sale of a Unit will be treated as a sale by a Unit holder of hisinterest in a royalty interest. Gain or loss on the sale of Units by a Unit holder who is not a dealer withrespect to such Units and who has a holding period for the Units of more than one year generally will betreated as long-term capital gain or loss except to the extent of the depletion recapture amount. Thedepletion recapture amount is ordinary income and equals the lesser of (1) the gain on such saleattributable to the disposition of the royalty interest, or (2) the sum of the prior depletion deductionstaken with respect to the royalty interests (but not in excess of the initial basis of such Units allocated tothe royalty interests).

Backup Withholding

A payor is required under specified circumstances to withhold tax at the rate of 24 percent on‘‘reportable interest or dividend payments’’ and ‘‘other reportable payments’’ (including certain oil andgas royalty payments). Generally, this ‘‘backup withholding’’ is required on payments if the payee hasfailed to furnish the payor a taxpayer identification number or if the payor is notified by the Secretary ofthe Treasury to withhold taxes on such payments with respect to the payee.

Amounts withheld by payors pursuant to the backup withholding provisions are remitted to theInternal Revenue Service and are considered a credit against the payee’s federal income tax liability. Ifthe payee does not incur a federal income tax liability for the year in which the taxes are withheld, thepayee will be required to file the appropriate income tax return to claim a refund of the taxes withheld.

State Tax

Unit holders may be required to file state tax returns and may be liable for state tax as a result of theirownership of Trust Units. The Properties are located in Florida, Louisiana, Mississippi, New Mexico,Oklahoma and Texas. The tax information included in this booklet is presented in a manner to enableUnit holders to compute the income and deductions of the Trust attributable to each of these states. Unitholders will need this information to comply with the state tax filing requirements in those statesimposing a tax. The laws pertaining to tax in any given state may vary from those of another state andfrom those applicable to federal income tax. Accordingly, Unit holders should consult their own taxadvisors concerning state tax compliance matters relating to ownership of Units.

The Trustee has been informed that certain states have contacted Unit holders regardingunderpayments of the state tax imposed on the Unit holders’ income from the Trust. Failure by Unitholders to report their state tax liability properly could result in the direct withholding of state taxes fromTrust distributions. Accordingly, Unit holders are urged to review carefully the various filing requirementsof the states in which the Properties are located to determine if a state tax liability exists as a result of theownership of Units in the Trust.

Florida does not have a personal income tax. Florida imposes an income tax on resident andnonresident corporations (except for S corporations not subject to the built-in-gains tax or passiveinvestment income tax), which will be applicable to royalty income allocable to a corporate Unit holderfrom Properties located within Florida.

Louisiana, Mississippi, New Mexico, and Oklahoma each impose taxes applicable to both residentand nonresident individuals and/or corporations (subject to certain exceptions for S corporations andlimited liability companies, depending on their treatment for federal tax purposes), which will apply toroyalty income allocable to a Unit holder from Properties located within those states. Even though thereare variances from state to state, taxable income for state tax purposes is often computed in a mannersimilar to the computation of taxable income for federal income tax purposes.

New Mexico and Oklahoma impose a withholding tax on payments to nonresidents of oil and gasproceeds derived from royalty interests. To reduce the administrative burden imposed by these rules,

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the Trustee has opted to allow the payors of oil and gas proceeds to withhold on royalty payments madeto the Trust. The Trust has filed New Mexico and Oklahoma tax returns, obtained a refund, anddistributed that refund to Unit holders. Unit holders who transfer their Units before either the New Mexicoor Oklahoma tax refunds are received by the Trust or after the refunds are received but before the nextMonthly Record Date will not receive any portion of the refund. As a result, such Unit holders mayeffectively incur a double tax—first, through the reduced distribution received from the Trust (aswithholding at the Trust level reduces the amount of cash available for distribution); and second, by thetax payment made directly to New Mexico or Oklahoma taxing authorities with the filing of theirNew Mexico or Oklahoma income tax returns.

Texas imposes a franchise tax at a rate of .75% on gross revenues less certain deductions, asspecifically set forth in the Texas franchise tax statutes. Entities subject to the Texas franchise taxgenerally include trusts and most other types of entities that provide limited liability protection, unlessotherwise exempt. Trusts that receive at least 90% of their federal gross income from certain passivesources, including royalties from mineral properties and other non-operated mineral interest income,and do not receive more than 10% of their income from operating an active trade or business generallyare exempt from the Texas franchise tax as ‘‘passive entities.’’ The Trust has been and expects tocontinue to be exempt from Texas franchise tax as a passive entity. Because the Trust should be exemptfrom Texas franchise tax at the Trust level as a passive entity, each Unit holder that is a taxable entityunder the Texas franchise tax generally will be required to include its portion of Trust revenues in its ownTexas franchise tax computation. This revenue is sourced to Texas under provisions of the TexasAdministrative Code, sourcing such income according to the principal place of business of the Trust,which is Texas.

All states have not adopted federal law with respect to percentage depletion nor are the methods forcomputing percentage depletion consistent among the various states. It should be noted, however, thatcost depletion generally is allowed by those states in which the Properties are located (Unit holdersshould note that a special depletion rule applies in Oklahoma). Information is included previously withinthis booklet to assist you in determining the respective allowable cost depletion deductions by state.

Unit holders should consult their own tax advisors concerning the type of state tax returns that maybe required and their applicable due dates.

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Following is a list of names and addresses of the various state taxing authorities from which you mayobtain additional information:

Florida Florida Department of Revenue5050 W. Tennessee StreetTallahassee, Florida 32399-0100(850) 488-6800http://floridarevenue.com

New Mexico Individuals: State of New MexicoTaxation and Revenue Department1100 South Saint Francis DriveP.O. Box 25122Santa Fe, New Mexico 87504-5122(505) 827-0700, (505) 827-0951www.tax.newmexico.gov

Corporations: New Mexico Taxation and Revenue DepartmentAttention: Corporate Income and Franchise TaxP.O Box 25127Santa Fe, New Mexico 87504-5127(505) 827-0825www.tax.newmexico.gov

Mississippi Mississippi Department of RevenueP.O. Box 1033Jackson, Mississippi 39215-1033(601) 923-7700www.dor.ms.gov

Louisiana Department of Revenue and TaxationState of LouisianaP.O Box 201Baton Rouge, Louisiana 70821-0201(855) 307-3893www.rev.state.la.us

Oklahoma Individuals: Oklahoma Tax CommissionP.O. Box 26800Oklahoma City, OK 73126-0800(405) 521-3160www.ok.gov/tax/

Corporations: Oklahoma Tax CommissionP.O. Box 26800Oklahoma City, Oklahoma 73126-0800(405) 521-3126www.ok.gov/tax/

Texas Texas Comptroller of Public AccountsP.O. Box 13528, Capitol StationAustin, Texas 78711-3528(800) 252-1381http://comptroller.texas.gov/

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5JAN201215452948

TAX INFORMATION2018

Sabine Royalty Trust2911 Turtle Creek Blvd, Suite 850

Dallas, Texas 75219Simmons Bank, Trustee

1-855-588-7839fax 214-559-7010

www.sbr-sabine.com

tax information 2018factors permits the presentation of a single cost depletion factor for all unit...

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