Being forced to abandon your homestead

[mcb39]

OK, fellow has to leave his home (homestead) because the State builds a road through part of his property, he has no access and the zoning is changed. The mobile home he lived in with his parents had to be removed and he moved unwillingly. Probably 2009 or so. Now, he has a chance to sell the vacant land at a quite decent profit.

Question is: Is there any way that he qualifies for the Home Sale Gain Exclusion under either Unforeseen Circumstances or Facts and Circumstances. (Single fellow, very shy asking me questions as a friend.) Also, someone told him that if he sold it for less than assessed value, he would have to pay gift tax on it. His lady friend just passed away a few weeks ago and he is distraught, confused and extremely nervous. I will be trying to help him pro bono.

[kcjenkins]

Did he move to a different part of the property? Or to a different location entirely? If he's been living somewhere else for 5 years I don't see how you could call it his home now.

[Richcpaman]

MCB:

Sorry he is so shy.

You need to get more facts. And not treat this as a "friend". Because if he does it wrong, you are no longer the "friend" you are the trusted advisor who told him that he could do this.....

The answer to him until he decides to become more talkative, is "Yes, it ALL taxable, except for basis..."

There are multiple code sections in play here. You need a proper timeline of events, amounts paid, who paid them for what, and the purposes of those payments. Then you need to know what is to happen going forward.

With all the facts, not "info that helps him save taxes, but ALL the info" you can help him to structure the deal to save him taxes.... Or at least report it correctly...

Rich

[mcb39]

I know better than to make false promises or guesses. He is shy, but not stupid. He fully expects to pay tax on gain. I was just reading something about Facts and Circumstances in Quickfinder after he left, which gave me an inkling that there is a possibility that he could qualify for the exclusion. No he did not live there in the past five years. He would still be living there if he could, but the mobile he was living in all of his life was condemned after the physical access was cut off by the building of the State road. His only option was to build a new home and road access on the property and that was financially impossible as he had lost his job. Our township does not allow him to bring in a new mobile. The one he had was Grandfathered in prior to the condemnation. We aren't trying to cheat; just wondering if this qualifies as an Unforeseen Circumstance.

[Richcpaman]

MCB:

But the issues are here, and there are some options that may help defer the gain. And the timeframes can be critical. And he may be able to get condemnation proceedings from the state/county.

Lots of things to do, and maybe help your client out. What is the sale price on the remaining land?

[mcb39]

MCB:

But the issues are here, and there are some options that may help defer the gain. And the timeframes can be critical. And he may be able to get condemnation proceedings from the state/county.

Lots of things to do, and maybe help your client out. What is the sale price on the remaining land?

He has been offered $60,000, but it is assessed at $110,000. Someone told him he would have to pay gift tax on the difference if he sells for $60,000. Ever heard of that?

[Richcpaman]

There would be no gift tax on the $50 between the selling price and the assessed value. Is the Government buying the property?

[mcb39]

There would be no gift tax on the $50 between the selling price and the assessed value. Is the Government buying the property?

An unrelated private party. I couldn't find a cite on this and had never heard of it. Of course, he got the info from the "guys at the coffee shop". As if the poor guy isn't riled enough. In any event, it is unlikely that he will sell it at that much of a loss. He understands that someone is trying to take advantage of him.

[Lion EA]

If he sold voluntarily at a loss (to a relative, say, at a discount) when he could have gotten FMV, only then a gift tax return would come into play. If he can't get any offers any higher, then he didn't "give" anything away.

[kcjenkins]

Important thing is to list it for sale, and try to get the best deal he can. If he makes a private sale significantly below appraised value, without listing it, the IRS might question it, but unlikely if the buyer is truly an unrelated buyer.

[mcb39]

If he sold voluntarily at a loss (to a relative, say, at a discount) when he could have gotten FMV, only then a gift tax return would come into play. If he can't get any offers any higher, then he didn't "give" anything away.

That's pretty much what I told him. (Willing buyer and willing seller theory) no relative or friend!