Son quit claimed lot 1 to mom and dad in 2000. They purchased a mobile home put it on the lot and lived there. Dad died in May 2016 and his half ownership goes into joint revocable trust. Dec 2016 mom decided to sale the lot with the house on it and thinks the lot next door isn't easily to build on so she convinces son to quit claim lot 2 to her. In Apr 2017 Mom sales house and extra lot for $100,000. Allocating $80,000 to lot 1 with house and $20,000 to lot 2.
I know you can exclude gain from vacant lot IF: " You owned and used the vacant land as part of your home. The sale of the vacant land and the sale of your home occurred within 2 yrs of each other. and Both sales either meet the Eligibility Test or qualify for partial tax benefits."
Does lot 2 qualify to be treated as part of home and thus gain excluded? (I leaning no due to short time owned)
The money mom paid from the trust was paid directly on the mortgage the son has on the 6 lots he owns (now 4). They had agreed when he deeded the lots that she would pay for them whenever she sold them.
So does half of the $45,000 payment count as a gift (money for lot 1) and half count as actually purchasing lot 2? Division being due to length of time from deed to payment.
OR as I suspect we are looking at the $45000 gift? and the land a gift from him to mom?
Any answers or references helpful. I have spent hours trying to figure this out.