Discussion:Right of Way Acquisition by City Taxable
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Discussion Forum Index --> Tax Questions --> Right of Way Acquisition by City Taxable
| 5 May 2008 | |
| 2007 T/P pruchase rental. During 2007, City offer to pay $8,100 for Right of Way Acquisition of a section of their land.
Currently we are showing: LTCG of $7,660 caculated as follows: Gross Proceeds - $8,100 Less: Costs of Grass and fencing - $440 Q1: Wouldn't this be STCG since acquired in 2007 or is there an exception to this rule? Q2: Or would you show no gain and just reduce adjusted basis of rental property, that being the land of 7,660 net? Thankyou for your assistance. | |
| 6 May 2008 | |
| Amounts received for easements generally reduce the basis of the affected land. | |
| 10 May 2008 | |
| My assoiciate states otherwise and claims it is STCG however has no source, do either of Riley2 or Lancermc have
a source I can refer my assoicate to? Does this tax treatment have to do with the fact it is involuntary sale? | |
| 11 May 2008 | |
| Yes that is what most of my accounting associates are referring to. They either state it is taxable as STCG or it will become taxable if not reinvested within a 2 year period. Still trying to find a code section or some pub which provides the correct reporting.
Anyone had a client with this type of transaction? | |
| 11 May 2008 | |
| Dude? I do have a client in Orlando with an eminent (thanks for the spell check Natalie :)) domain. The easement and right of way does belong to the county/state and if they want to absorb it, then they need F/S to determine what the FMV of the property absorbed is. My client in Longwood had a major highway take 5 parking spaces and her sign but the eminent domain CPA was the firm that established the value of the property.
It is taxable to her as she cannot reinvest it in like kind property since all is owned by the county in the surrounding areas. I think this applies to involuntary conversionsPublication 544. Don't quote me however :) | |
| 11 May 2008 | |
| Dude? I do have a client in Orlando with an eminent (thanks for the spell check Natalie :)) domain. The easement and right of way does belong to the county/state and if they want to absorb it, then they need F/S to determine what the FMV of the property absorbed is. My client in Longwood had a major highway take 5 parking spaces and her sign but the eminent domain CPA was the firm that established the value of the property.
It is taxable to her as she cannot reinvest it in like kind property since all is owned by the county in the surrounding areas. I think this applies to involuntary conversionsPublication 544. Don't quote me however :) | |
| 12 May 2008 | |
| Rev Ruling 68-291 says the amount received for a limited use easement reduces the basis of the affected property. If the easement denies the taxpayer from any beneficial use at all of the easement property then it could be considered a sale. | |
RoyDaleOne (talk|edits) said: | 12 May 2008 |
| What easement?
"Right of Way Acquisition of a section of their land" could or could not be an easement. | |
RoyDaleOne (talk|edits) said: | 12 May 2008 |
| Because only a "section of their land" is being effected, a proration of the land cost needs to made to part that is being effected and the remaining part. | |
| 13 May 2008 | |
| Dude, see Revenue Rulings 68-291, 59-121, and 76-69.
If the taxpayer is retaining more than just legal title, he will simply reduce basis by the amount of the money received from the city. On the other hand, if the taxpayer’s interest in the land is reduced to just legal title, then he would treat this as a sale and either a gain or loss would be realized. For example, if the city purchased an easement to flood the taxpayer’s land for a wildlife preserve, the land becomes basically worthless to the taxpayer and he would realize a gain or loss. | |
