Sale of Development Rights

[mrichman333]

Ok, I have land on which my home is located that is farm assessed and I am thinking of applying to have the land put in the NJ open spaces program. I would receive money for giving up my right to develop the property but retain ownership of it.

Wondering how that sale would be taxed? I thinking it's a ordinary capital gain. But if I hold the rights and one day sell the property as a whole it would be the sale of my main home which would be taxed more favorably.

Anyone have experience with sell development rights?

Thanks

Mary

[DANRVAN]

It would be treated as a reduction in the property basis if the development right decreases the FMV.

Rev Rul 77-414, 1977-2 CB 299.

[kcjenkins]

I agree, not a sale, but reduce basis.

[mrichman333]

^{Thanks That's great}