Sale of land-was part of home

[Kea]

Client bought home & 6 acres of land in 2006. In 2012, they sold 5 acres & kept 1 acre & house. Assuming he doesn't sell remainder in 2 years, he would report gain on sale on Schedule D. It would not qualify for $250K exclusion.

However, in this case, there is a small loss. So even though a gain would have to be realized, a loss still cannot since it was his personal property & got the "enjoyment" of owning it. Don't report loss on Sch D.

Did I get that right? In this case it basically follows the OLD home sale rules - report gain but not loss?

(FWIW, he is carrying the loan on the sale. But since it's a loss, there will be no 6252 for it. Just thought I'd throw that in, but I don't think it changes any of the above.)

[ljwalters]

When he baught the land in 2006 was it already divided. In other words did he buy 2 parcels or did he pay to subdivide. I believe that would make a difference.

[Kea]

It was originally 3 tracts and he sold 2. He kept the one with the house.

[ljwalters]

Were the 2 tracts purchased for investment purposes? Purchased in 06 hold for 1 year. market crashes can't sell. now sells at loss sounds like investment to me.

What were his original plans, investment or horse/cattle ranch or maybe like all my neighbors vineyard. That would determine it for me.

any other opinions.

[Kea]

Thanks for the insight. Looks like I have to ask more questions! (That's the name of this business, right?)

[Guest Taxed]

If they were 3 separate tracts, did the state or county bill for land tax separately for each tract? In my neck of the woods separate tracts even though owned by same owner means separate tax bills. It is easier to prove then that 1 was for personal use and the other 2 were investment properies, hence Sch D on the disposition.

I am assuming there was nothing built on the other 2 tracts, just virgin land???

[Kea]

Correct - raw land. Am waiting for email from client to see how land was used.

Thanks!

[Kea]

Per client - land was purchased to have livestock, but he never had time, so just used it as a large yard.

It was all billed on one property tax statement. However, a search on the County website does show 3 parcels.within the one listing. Nothing is billed separately, but it does list 3 areas with different # of acres.