Selling Land

[Trnr395]

I have a client who is considering selling some land that is considered a gravel pit. For this example he is selling the land for 500,000 and purchased the land 25 years ago at say 50,000. The land is going to be owner financed for ten years with 5% interest. Obviously this is going to be an installment sale each year for ten years and also interest income. Is there anything that I can add to the basis of 50,000. There hasn't been anything really done to the land except some blasting for granite, etc. They had talked about selling this material as stumpage but I am not sure how this would work in their best interest. Anybody have any insight on the best way to handle this or any advice??

thanks

[OldJack]

The installment sale amount each year probably qualifies for capital gain treatment by way of form 4797 to Sch-D.

[Trnr395]

Yea, that is how I have always handled something like this in the past. I was just wondering if there was a better way to handle a transaction like this. Is there any items that could be used to increase basis....not really much for improvements on land??

[OldJack]

Depending upon how the accounting was done in the past, his basis may have actually been reduced as natural materials were removed from the land. I would expect that any so called improvements such as roads were fully expensed in the years expended.