How to determing capital gains on a partial house sale...

Yes. Allocate, using a reasonable method. County asessments sound like a reasonable method.

Were these business/rentals or personal use properties?

If business/rentals, the appliances have to be separated from the rest of the property, and the sales price allocated to applicances, and in any case, the land has to be allocated and treated separately.

In fact if business/rental I would recommend you obtain paid professional tax advice.

And I'll bet you did not report this income when received? if so, you reduced your basis in the propert(ies) by the amount redeived.

Personal

No, I didn't. Was reporting it as income when received an option?

That makes it easy. No depreciation, no separating class types.

Was it an easement or was it an option?

It was an easement. Did I have the option of reporting it as income when received?

That's a good question. I would think you could have reported it as income when received, reported it as a capital gain.

Basis still gets reduced by the ajdusted cost basis of property deeded in the easement, rather than the amount reeived for the easement.

But I'm willing to be told I'm wrong.

Reducing basis is the correct approach since you have not transferred the property. You always have the option of reporting it on the "Other Income" line since the IRS has never been averse to people overpaying their taxes.

This answer is correct for the average homeowner receiving $2,000 for a usage easement. For anything exceeding $2,000, you are advised to discuss this the matter with a CPA, an Enrolled Agent, or a Tax Attorney who understands the facts and circumstances of your situation.

Why $2,000? - Because It seems to me to be the FMV for a usage easement. If you disagree or have a better threshold, feel free to chime in.

Dick

usage of what? Seems every case would have to be looked at on its own merits.

and what type of an easement is NOT for "usage"? And why would a "usage easement", even if $2,000 or less, be treated under some different rules?

or am I not following along here?

I would say that if the FMV of the easement *at the time you purchased the property* is the amount received, then it reduces the basis. If the amount received exceeds that, then the excess is capital gains, and the FMV at purchase time reduces basis. (Presumably the amount received is the FMV at the time the easement is sold.)

I don't see why any fixed number is FMV for a usage easement of both

20 square feet in suburban Indiana and 200 square feet in suburban NYC. (It does make sense that the IRS has a threshhold below which they don't feel it's worthwhile getting the actual value of an easement.)

Seth

Some easements are to stop usage. There are, for example, preservation easements that dedicate property to public use and non- development. There have been times when giving a preservation easement to a nonprofit organization could result in a tax deduction, though I don't know if that's still the case.

that is a use. the property subject to the easement is being used (as open space) by those to whom the easement was granted. Just like a utility easement.

I pay my neighbor _not_ to chop down the trees that keep people on the street from seeing my windows and block some noise. I don't get to sit under those trees, just to enjoy the fact that they're still there.

Seth

You're thinking of Section 170(f)(3)(B)(iii).

that is use. You are using the trees to "keep people on the street from seeing my windows and block some noise".

use does not equal "sit under"

We all know that the tax solution of every situation depends upon the facts, i.e., its own merits.

Quite possibly I could have used a better adjective. Let me give you an example where an easement became taxable income. A rural county wanted to build a road across a farmer's land taking it by emmient domain at FMV. Realizing the sale was taxable income to him the farmer negoiated to grant the county a renewable 99 year easement for slightly less than the offering price. The county grabbed the offer and he adjusted his basis. The IRS took the position that this was either a sale or a lease. The farmer went back and changed the deal to a sale. An easement was not acceptable to the IRS because of the county's offer to buy.

So let me restate that amounts received by the average homeowner for an easement are reductions in basis. The average homeowner is someone with a single family dwelling on 1 acre or less

- after that consult your local tax professional.

Dick

As I understand it, the grant of an easement and the sale would be treated the same, i.e. adjust the basis and pay gain based on the amount received that is greater than the basis in the property conveyed. I don't know of anything that says otherwise, depending on if the matter pertains to a personal residence, a single family dwelling, on less than 1 (or other number) acre, is less than $x, or anything else.

Of course, common sense tells me that if this happened to me, for a small amount of money, I would just reduce the basis (regardless of any gain) and let it go at that. But, that is just me.

I think all this talk about when not to apply the rules are just lore with no basis in fact.

OK, I own several square miles of land. On part of it, I build a

25,000 square foot house. I sell off the rest of it in 5-acre lots, and hold back easements preventing anyone from building a house larger than 20,000 square feet in order to be able to boast that I have the largest house in the neighborhood. What sort of "usage" is that?

Seth

you are using their land, to the extent you have prevented them from doing so.

I'm surprised this aspect of this thread has taken on such a life.

of land, by reason of such ownership, to use the land of another for a special purpose not inconsistent with a general property in the owner."

Easement. Use. Done.