Coal Mine Subsidance

[spanel]

I have a client that is getting 2x-3x their house value for future subsidence issues.

Is this taxable? How is this handled?

Thanks

Chris

[Rapid Robert]

Not enough facts to answer.

[spanel]

What other facts are needed.

Client owns land/house and it getting paid for future damages or potential damages.

Chris

[Rapid Robert]

edit: "What other facts are needed." First "fact", is why do you think it might not be taxable? After all, gross income includes all income from whatever source derived.

edit #2: "What other facts are needed." What questions did you ask the client? Or is what you posted to begin all the information you have?

Is the property being sold? (probably not but was not clear from first post). Who is paying? Why are they paying (just out of the goodness of their heart)? Why are they paying now instead of when property was purchased, or waiting until a problem actually arises? What is the property owner agreeing to in exchange for getting the money? Even if the house were to become totally worthless in the future due to a disaster, why would that involve getting 2-3 times the value of house now?

Is this a one off, or a class of property owners getting the money? Can I still buy an affected property now and also get 2-3 times what I paid? I'll take that deal and gladly pay the tax!

[Lion]

Read the contract.

[spanel]

Haven't received the contract yet... Rep said it was tax free because of "there would be a loss". That being said, I dont agree. They are paying my client approx what the house is currently worth for future damages that might occur.

"I think" what's going on is they are selling the house to the coal mines and buying it back for $1. If they have lived there 2/5 years, no tax on 250/500 profit. If they have not, then possible gain/loss at capitol gains rates..

Chris

[Twin Turbo Z]

Was it part of a class action lawsuit ?

[Rapid Robert]

Was it part of a class action lawsuit ?

If you would read the thread, you'd see that this is one of several questions already asked but not yet answered. It seems the OP doesn't really have much info yet, as certain "facts" presented have already changed (first it was "receiving 2-3 times the FMV of the property" now it is some kind of bizarre sale/re-purchase transaction).

[spanel]

No class action.

Again, I really need the contract.. Just speculating at this point. (client also has not received contract, just talked to rep)

Coal mines are long wall mining under his property and there is a 99% chance the property will "fall or subside" in the near future. They are paying in advance of this damage, in this case approx FMV of house. I was mistaken about the 2-3x the value.

The rep said it was tax free because he would have a loss.... but no details on how exactly its tax free.

Chris

[DoubleO]

Is the company perhaps buying an easement or perhaps mineral rights?