Taxpayer purchased 4 acres of vacant land, then built their primary residence on it in the 60's. Taxpayer sold a 1/2 acre lot in '05. Is basis 1/8th of original purchase price of the 4 acres, and taxable? Does the fact that it was part of their primary residence have anything to do with how it is reported?
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I haven't looked yet, but the first place I would start if I were you would be the Section 121 regs. -
Part of residence
Are they planning on selling the residence within 24 months of the lot sale? If yes then the lot can be considered non taxable under Sec 121, however, if the house does not sell within 24 months then you would have to amend the 05 and claim the gain.
If they are not planning on selling the residence then the sale is taxable on Schedule D.I would put a favorite quote in here, but it would get me banned from the board.Comment
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Thanks for your help, DavidComment
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If the residence is not sold prior to the filing date of the return for the year the land is sold then you report it as taxable and amend if you qualify later.Originally posted by Matt Sova
1.121-1(b)(3)(ii)(C) Sale or exchange of vacant land before dwelling unit.
If the sale or exchange of the dwelling unit occurs in a later taxable year than the sale or exchange of the vacant land and after the date prescribed by law (including extensions) for the filing of the return for the taxable year of the sale or exchange of the vacant land, any gain from the sale or exchange of the vacant land must be treated as taxable on the taxpayer's return for the taxable year of the sale or exchange of the vacant land. If the taxpayer has reported gain from the sale or exchange of the vacant land as taxable, after satisfying the requirements of this paragraph (b)(3) the taxpayer may claim the section 121 exclusion with regard to the sale or exchange of the vacant land (for any period for which the period of limitation under section 6511 has not expired) by filing an amended return.Comment
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