Can anyone tell me how the taxable profit is determined when a parcel is sold that was subdivided from a larger lot with a house on it? Original price of house and 4 acreas of land - $105k
1.5 acre parcel sold for $70kThanks in advance
Go back in time to original purchase and determine separate costs of house and the 4 acres of land. Unless something happened to increase the basis of the acreage, you've got your cost per acre. ChEAr$, Harlan Lunsford, EA n LA
First, you need a separate valuation of the house and the land at the time of purchase. Subtract the house "cost basis" from the purchase price to get the value of the land.
4L = 105k - H Divide land value (4L) by 4 to arrive at a "per acre" basis (L). This assumes equal value for all sections of land, which may be erroneous. Other methods may be used, depending on circumstances or features of each parcel (suitability for building, access, water, etc). Determine value of parcel sold, 1.5LGain = 70k - (1.5L)
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