I live in a home on 3.5 acers of land. I just sudivided it and I want to sell the lot (1.7 acers).
2007-05-06 07:44:00 · 3 answers · asked by james@pam s 2 in Business & Finance ➔ Taxes ➔ United States
Yes, of course you do. Since you have subdivided the plat you'll have to apportion the basis between the portion you are keeping and the portion you are selling. You're selling about 49% of the original plot so you'd generally use 49% of the original cost basis for the land as the basis for the piece you are selling.
If the house existed on the land when you purchased it, you'll have to separate the values of the land and the improvements before you apportion the cost of the land alone, of course. The apportioned basis of the land can only include the cost of the land itself, not any portion of the basis for the land with the house on it.
2007-05-06 07:50:39 · answer #1 · answered by Bostonian In MO 7 · 4⤊ 1⤋
I disagree with the apportionmemt suggested by my fellow Bostonian. The lot with the house on it would have a greater portion of the cost basis than the vacant lot.
The precise split of the basis is a grey area.
Also, just to be clear about capital gains tax owed, that won't happen until you sell the lot.
2007-05-06 08:58:40 · answer #2 · answered by r_kav 4 · 0⤊ 0⤋
bostonianinmo has a good answer. Also be aware that in most situations, you will receive a 1099-S (and so will IRS) reporting the sale.
2007-05-06 07:59:00 · answer #3 · answered by dwagsfive 2 · 1⤊ 0⤋