8949 Question

[Coal]

Gentleman acquires land for $1 in 2001. Excavates, moves in trailer & builds garage/building. 2010 gets married and moves in with new wife. Uses his property as storage.
2020 sells all for $45,000, land value is $7000. Is this a $6999 gain, or since he has not lived there for 10 years it basically becomes a second home, and the gain is on the $45,000 minus basis of excavating & building supplies for the garage?

[Lion]

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/property-basis-sale-of-home-etc/property-basis-sale-of-home-etc

[TaxGuyBill]

Gentleman acquires land for $1 in 2001.

You may need to find out more details about that. If it was "purchased" from a friend or family member, it may actually have been a Gift. THe $1 would just be a requirement for the legal paperwork for the transfer, but would not reflect the true nature of what was going on.

If it was a Gift, the Basis of the land would be the same Basis as the giver had.


Because it was not a Main Home, the gain is based on the $45,000 sale price compared to the Basis of all that was sold.

[TAXNJ]

See reply poster LION’s reply for IRS guidance.

[Rapid Robert]

See reply poster TaxGuyBill's reply for a helpful answer to the question from another tax professional.