Sale of Land

[RLymanC]

Client inherited raw land several years ago and sold in 2005. I feel this is investment property not used in a trade or business and should go on Schdule D.

Is my thinking correct, or should 4797 be used.

[Bird Legs]

Sale of Land

Report on Sched. D. No depreciation on raw land.

[jainen]

making it up

>>I feel this is investment property<<

Why do you "feel" that way? Is that what the client told you, or are you just making it up?

[John of PA]

Investment Property

Investment Propety indeed, that is if the intent upon purchase was to hold the property for re-sale vs deveoping it. So as Jainen is questing here, what was the client's true intent. Does the client have other land they are developing?

[RLymanC]

Land Sale

Thank you all for your response.
Sorry for the poor choice of words.

Client simply inherited a lot, kept it for 8 years and sold it. After reading your suggestions I feel it should go on Schdule D. :>)

[John of PA]

Yes I agree

Yes I agree, Sch. D taxed at the maximum capital gains rate (10 or 15%). Tax cost basis is the value at date of death. Hope this helps.

[RLymanC]

Form 1099-S

Any suggestions on how to handle the sale of real property where a 1099-S is issued to taxpayer for the full amount of the sale price, but in fact it was split 50/50 with his brother.

My guess is IRS will look for 100% of 1099-S.
Go after a corrected 1099-S???
Could I use second line on Sch, D to reduce sale price 50%???

[John of PA]

2 choices

One choice is to report the entire sale as a 100% taxable sale, then add into the cost basis the 1/2 amount to have the taxable gain come out to the correct amount. This of course would go through smoothly on any 1099-S matching. The other option is forget about the 1099-S, report the sale @ 1/2, wait for IRS to correspond, and explain at that time that 1/2 was residential..

[jainen]

Why did the brother get half?

Why did the brother get half? Was he actually on title, or was it just a personal understanding? If he wasn't on title, which is suggested by the 1099-S, then may be it was a gift or undocumented something, and the client is on the hook for the entire gain. If he was on title, the 1099-S should be corrected and the client should report his true basis and sale correctly.

[Bird Legs]

1099s-Sale of Land

In a lot of instances where the title is in 2 names the 1099S is issued to only one owner..
That one must then attach a statement showing how much belongs to the other owner(s).
Am half asleep, groggy and not thinking straight, so don't know if the above statement makes sense or not.

[Black Bart]

It CAN be something complicated, but most

of the time it's because:

1. it's less typing for the clerk.

2. the names of the other persons are available, but not the SSNs. It's too much trouble to try and get ahold of them and find out, so the clerk tells the seller it'll be okay as long as everybody turns in their part. Sellers usually aren't much interested in paperwork--they figure it's just a formality and, at the time, they generally don't care how it's written up.

3. they want to get the deal done that day. There may be five or six people involved and nobody else is available to get their numbers, so there's nothing else to do but give it all to one person. The mortgage company knows it will fly alright with IRS and after that it's the seller's problem. Also, they know that most taxpayers will rely on their tax preparer to fix it rather than coming back to them and trying to get a corrected 1099-S (an ordeal).

[Black Bart]

Something you CAN do:

This from page six of the 1099 instruction book entitled "General Instructions for Forms 1099, 1098, 5498, and W-2G" (can pull it up on Google).

Under the heading of "Who Must File."

"Nominee/middleman returns. Generally, if you receive a Form 1099 for amounts that actually belong to another person, you are considered a nominee recipient. You must file a Form 1099 (the same type of Form 1099 you received) for each of the other owners showing the amounts allocable to each. You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 with the Internal Revenue Service Center for your area. On each new Form 1099, list yourself as the "payer" and the other owner as the "recipient." On Form 1096, list yourself as the "filer." A husband or wife is not required to file a nominee return to show amounts owned by the other. The nominee, not the original payer, is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner."

This will work, I think. I've done it on 1099-INT forms. You'll still get a letter from IRS about it the next year, but you can send a Xerox of the forms to them and it'll give you credibility by having attended to it earlier. In my case, they sent a subsequent letter stating that the matter was resolved.