Exclusion of Gain - Personal Residence

[cpeters]

We (wife & I) anticipate the sale of our personal residence within the next two (2) years. The property consists of 11.681 acres.

Joining this acreage we own 19.677 acres of land with an 1840's log cabin, shelter, pump, septic system, electric, etc. We anticipate selling this property also and rebuilding our new home elsewhere.

In order to take advantage of the exclusion of gain, I am thinking about having the property (19.677 acres) re-surveyed excluding the cabin and approximately 1 1/2 - 2 acres leaving 18.177 acres of "vacant land" to be conveyed to myself & my wife with the cabin land and 1 1/2 - 2 acres conveyed to me.

Then, when we sell our personal residence (11.681 acres) and "vacant land" (18.177 acres) they would both come under the exclusion of gain up to $500,000 so long as the time frame was within the law.

The cabin and 1 1/2 - 2 acres would not come under the exclusion of gain and would be taxable as I see it.

Does this make sense?

Does anyone have any thoughts or suggestions of a better way to reach my objective.

I have been struggling with this scenerio and really need some advice and help.

I will appreciate everything anyone has to offer!!

[Bees Knees]

To include the sale of vacant land in with the sale of your principal residence, it has to be adjacent to the land containing the principal residence, it has to be used as part of the taxpayer’s principal residence, and the sale of the principal residence has to occur within two years before or after the sale of the vacant land.

A problem with your situation is that if the vacant land was a part of the property that is your cabin, the cabin could be considered a second home, not your principal residence. So I would advise that you separate the land from the cabin and then for at least 2 years use the land as part of your principal residence, not as part of your second home. Maybe even selling the cabin before selling your home and vacant land.

[cpeters]

Exclusion of Gain

The cabin land has been used as part of the principal residence for 27 years.......supply of fireplace wood, gardening, tools and machinery storage, etc. The cabin itself has never been used as a residence since we purchased it (estimate built in 1840) nor as a second home since it was purchased. It was my Great Grandfather's cabin and we tried to patch it up as best we could (roof leakage, termites, floor rotted out, windows gone etc) so as to preserve it as long as possible. Does this make any differerence as to how it could be considered? If we separate the cabin and an acre it sits on from the remaining acrege by map and deed would this not free up the land only to be considered exclusive of gain since it in fact has been adjacent to our principal residence for a number of years?

We have someone interested in purchasing the cabin and the land that surrounds it and possibly restoring it.

Your help is much appreciated.