How to determing capital gains on a partial house sale...
ted
I have now sold two of the properties for $250,000. How do I determine the
basis? My lawyer says I should apportion the $230,000 according to the tax
assessment on the three properties. Does that sound acceptable?
Also I have made some improvements; $10,000 for a porch, closet, and
electric/plumbing for new appliances, $1,000 for new appliances (which are
being sold with the cottage), and $5,000 for carpeting.
And I sold an easement for $2,000.
Which of those items change my basis?
thanks much
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Arthur Kamlet
ted <ted...@yahoo.com> wrote:
>I bought a cottage for $230,000 which consisted of 3 properties.
>
>I have now sold two of the properties for $250,000. How do I determine the
>basis? My lawyer says I should apportion the $230,000 according to the tax
>assessment on the three properties. Does that sound acceptable?
Yes. Allocate, using a reasonable method. County asessments sound
like a reasonable method.
>Also I have made some improvements; $10,000 for a porch, closet, and
>electric/plumbing for new appliances, $1,000 for new appliances (which are
>being sold with the cottage), and $5,000 for carpeting.
Were these business/rentals or personal use properties?
If business/rentals, the appliances have to be separated
from the rest of the property, and the sales price allocated to applicances,
and in any case, the land has to be allocated and treated separately.
In fact if business/rental I would recommend you obtain paid professional
tax advice.
>And I sold an easement for $2,000.
And I'll bet you did not report this income when received? if so, you
reduced your basis in the propert(ies) by the amount redeived.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
ted
>>And I sold an easement for $2,000.
>
> And I'll bet you did not report this income when received? if so, you
> reduced your basis in the propert(ies) by the amount redeived.
> --
ted
> Were these business/rentals or personal use properties?
Personal
Arthur Kamlet
ted <ted...@yahoo.com> wrote:
>
>>>And I sold an easement for $2,000.
>>
>> And I'll bet you did not report this income when received? if so, you
>> reduced your basis in the propert(ies) by the amount redeived.
>> --
>No, I didn't. Was reporting it as income when received an option?
Was it an easement or was it an option?
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
Arthur Kamlet
That makes it easy. No depreciation, no separating class types.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
ted
"Arthur Kamlet" <kam...@panix.com> wrote in message
news:hdt9pq$blu$2...@reader1.panix.com...
> In article <hdt71h$d0j$1...@news.eternal-september.org>,
> ted <ted...@yahoo.com> wrote:
>>
>>>>And I sold an easement for $2,000.
>>>
>>> And I'll bet you did not report this income when received? if so, you
>>> reduced your basis in the propert(ies) by the amount redeived.
>>> --
>>No, I didn't. Was reporting it as income when received an option?
>
>
> Was it an easement or was it an option?
It was an easement. Did I have the option of reporting it as income when
received?
Arthur Kamlet
ted <ted...@yahoo.com> wrote:
>
>"Arthur Kamlet" <kam...@panix.com> wrote in message
>news:hdt9pq$blu$2...@reader1.panix.com...
>> In article <hdt71h$d0j$1...@news.eternal-september.org>,
>> ted <ted...@yahoo.com> wrote:
>>>
>>>>>And I sold an easement for $2,000.
>>>>
>>>> And I'll bet you did not report this income when received? if so, you
>>>> reduced your basis in the propert(ies) by the amount redeived.
>>>> --
>>>No, I didn't. Was reporting it as income when received an option?
>>
>>
>> Was it an easement or was it an option?
>
>It was an easement. Did I have the option of reporting it as income when
>received?
That's a good question. I would think you could have reported it
as income when received, reported it as a capital gain.
Basis still gets reduced by the ajdusted cost basis of property
deeded in the easement, rather than the amount reeived for the
easement.
But I'm willing to be told I'm wrong.
Dick Adams
> ted <ted...@yahoo.com> wrote:
>> It was an easement. Did I have the option of reporting it
>> as income when received?
> That's a good question. I would think you could have reported
> it as income when received, reported it as a capital gain.
> Basis still gets reduced by the ajdusted cost basis of property
> deeded in the easement, rather than the amount reeived for the
> easement.
>
> But I'm willing to be told I'm wrong.
Reducing basis is the correct approach since you have not
transferred the property. You always have the option of
reporting it on the "Other Income" line since the IRS has
never been averse to people overpaying their taxes.
This answer is correct for the average homeowner receiving
$2,000 for a usage easement. For anything exceeding $2,000,
you are advised to discuss this the matter with a CPA, an
Enrolled Agent, or a Tax Attorney who understands the facts
and circumstances of your situation.
Why $2,000? - Because It seems to me to be the FMV for a
usage easement. If you disagree or have a better threshold,
feel free to chime in.
Dick
Wallace
> Why $2,000? - Because It seems to me to be the FMV for a
> usage easement. If you disagree or have a better threshold,
> feel free to chime in.
usage of what? Seems every case would have to be looked at on its own
merits.
and what type of an easement is NOT for "usage"? And why would a "usage
easement", even if $2,000 or less, be treated under some different rules?
or am I not following along here?
Seth
Dick Adams <rda...@panix.com> wrote:
>Reducing basis is the correct approach since you have not
>transferred the property.
I would say that if the FMV of the easement *at the time you purchased
the property* is the amount received, then it reduces the basis. If
the amount received exceeds that, then the excess is capital gains,
and the FMV at purchase time reduces basis. (Presumably the amount
received is the FMV at the time the easement is sold.)
I don't see why any fixed number is FMV for a usage easement of both
20 square feet in suburban Indiana and 200 square feet in suburban
NYC. (It does make sense that the IRS has a threshhold below which
they don't feel it's worthwhile getting the actual value of an
easement.)
Seth
Stuart A. Bronstein
> and what type of an easement is NOT for "usage"?
Some easements are to stop usage. There are, for example,
preservation easements that dedicate property to public use and non-
development. There have been times when giving a preservation
easement to a nonprofit organization could result in a tax deduction,
though I don't know if that's still the case.
--
Stu
http://downtoearthlawyer.com
Wallace
"Stuart A. Bronstein" <spam...@lexregia.com> wrote in message
news:Xns9CC84ADE87949s...@130.133.1.4...
> "Wallace" <please...@microsoft.com> wrote:
>
>> and what type of an easement is NOT for "usage"?
>
> Some easements are to stop usage. There are, for example,
> preservation easements that dedicate property to public use and non-
> development. There have been times when giving a preservation
> easement to a nonprofit organization could result in a tax deduction,
> though I don't know if that's still the case.
>
that is a use. the property subject to the easement is being used (as open
space) by those to whom the easement was granted. Just like a utility
easement.
Seth
Wallace <please...@microsoft.com> wrote:
>and what type of an easement is NOT for "usage"?
I pay my neighbor _not_ to chop down the trees that keep people on the
street from seeing my windows and block some noise. I don't get to
sit under those trees, just to enjoy the fact that they're still
there.
Seth
D. Stussy
news:Xns9CC84ADE87949s...@130.133.1.4...
> > and what type of an easement is NOT for "usage"?
>
> Some easements are to stop usage. There are, for example,
> preservation easements that dedicate property to public use and non-
> development. There have been times when giving a preservation
> easement to a nonprofit organization could result in a tax deduction,
> though I don't know if that's still the case.
You're thinking of Section 170(f)(3)(B)(iii).
Wallace
"Seth" <se...@panix.com> wrote in message
news:he4cbu$i2s$4...@reader1.panix.com...
> In article <he1tjl$fbq$2...@news.eternal-september.org>,
> Wallace <please...@microsoft.com> wrote:
>
>>and what type of an easement is NOT for "usage"?
>
> I pay my neighbor _not_ to chop down the trees that keep people on the
> street from seeing my windows and block some noise. I don't get to
> sit under those trees, just to enjoy the fact that they're still
> there.
that is use. You are using the trees to "keep people on the
street from seeing my windows and block some noise".
use does not equal "sit under"
Dick Adams
> Dick Adams <rda...@panix.com> wrote:
>> Why $2,000? - Because It seems to me to be the FMV for a
>> usage easement. If you disagree or have a better threshold,
>> feel free to chime in.
> usage of what? Seems every case would have to be looked at
> on its own merits.
We all know that the tax solution of every situation depends
upon the facts, i.e., its own merits.
> and what type of an easement is NOT for "usage"? And why
> would a "usage easement", even if $2,000 or less, be treated
> under some different rules?
Quite possibly I could have used a better adjective. Let me
give you an example where an easement became taxable income.
A rural county wanted to build a road across a farmer's land
taking it by emmient domain at FMV. Realizing the sale was
taxable income to him the farmer negoiated to grant the
county a renewable 99 year easement for slightly less than
the offering price. The county grabbed the offer and he
adjusted his basis. The IRS took the position that this was
either a sale or a lease. The farmer went back and changed
the deal to a sale. An easement was not acceptable to the
IRS because of the county's offer to buy.
So let me restate that amounts received by the average homeowner
for an easement are reductions in basis. The average homeowner
is someone with a single family dwelling on 1 acre or less
- after that consult your local tax professional.
Dick
Wallace
"Dick Adams" <rda...@panix.com> wrote in message
news:he905b$d8j$1...@reader1.panix.com...
As I understand it, the grant of an easement and the sale would be treated
the same, i.e. adjust the basis and pay gain based on the amount received
that is greater than the basis in the property conveyed. I don't know of
anything that says otherwise, depending on if the matter pertains to a
personal residence, a single family dwelling, on less than 1 (or other
number) acre, is less than $x, or anything else.
Of course, common sense tells me that if this happened to me, for a small
amount of money, I would just reduce the basis (regardless of any gain) and
let it go at that. But, that is just me.
I think all this talk about when not to apply the rules are just lore with
no basis in fact.
Seth
Wallace <please...@microsoft.com> wrote:
>"Seth" <se...@panix.com> wrote in message
>news:he4cbu$i2s$4...@reader1.panix.com...
>> In article <he1tjl$fbq$2...@news.eternal-september.org>,
>> Wallace <please...@microsoft.com> wrote:
>>
>>>and what type of an easement is NOT for "usage"?
>>
>> I pay my neighbor _not_ to chop down the trees that keep people on the
>> street from seeing my windows and block some noise. I don't get to
>> sit under those trees, just to enjoy the fact that they're still
>> there.
>
>that is use. You are using the trees to "keep people on the
>street from seeing my windows and block some noise".
>
>use does not equal "sit under"
OK, I own several square miles of land. On part of it, I build a
25,000 square foot house. I sell off the rest of it in 5-acre lots,
and hold back easements preventing anyone from building a house larger
than 20,000 square feet in order to be able to boast that I have the
largest house in the neighborhood. What sort of "usage" is that?
Seth
Wallace
> In article <he4l3h$5jl$1...@news.eternal-september.org>,
> Wallace <please...@microsoft.com> wrote:
>>"Seth" <se...@panix.com> wrote in message
>>news:he4cbu$i2s$4...@reader1.panix.com...
>>> In article <he1tjl$fbq$2...@news.eternal-september.org>,
>>> Wallace <please...@microsoft.com> wrote:
>>>
>>>>and what type of an easement is NOT for "usage"?
>>>
>>> I pay my neighbor _not_ to chop down the trees that keep people on the
>>> street from seeing my windows and block some noise. I don't get to
>>> sit under those trees, just to enjoy the fact that they're still
>>> there.
>>
>>that is use. You are using the trees to "keep people on the
>>street from seeing my windows and block some noise".
>>
>>use does not equal "sit under"
>
> OK, I own several square miles of land. On part of it, I build a
> 25,000 square foot house. I sell off the rest of it in 5-acre lots,
> and hold back easements preventing anyone from building a house larger
> than 20,000 square feet in order to be able to boast that I have the
> largest house in the neighborhood. What sort of "usage" is that?
you are using their land, to the extent you have prevented them from doing
so.
I'm surprised this aspect of this thread has taken on such a life.
>From Black's Law Dictionary: "Easement. A right in the owner of one parcel
of land, by reason of such ownership, to use the land of another for a
special purpose not inconsistent with a general property in the owner."
Easement. Use. Done.