mcb39 Posted February 27, 2012 Report Share Posted February 27, 2012 Have a client who sold a piece of land to the state unwillingly. We are trying to build some basis in it but it will not be a lot as it has been his and before that his parents' homestead for many years. He acquired it in 1988 and the state took it for part of a highway. He received $73200. He is normally in a 15% bracket which means no CG tax. Instructions for 8949 say to leave columns b and g blank as he did receive a 1099-S. If I do that, it leaves him with no gain. If I put the amount of the gain thus far in column g; the tax is then figured on the CG tax worksheet. Am I thinking correctly that some of this gain should be taxed or is it possible that he really will owe no tax. There is also the possibility of deferring the gain as it is part of his homestead which he has now listed for sale as they took a large portion of his yard and the road will pass nearby his house. There is also that inherent clause that states if you sell land that is part of your homestead either 2 years before or 2 years after the sale of your main home; you can defer the gain. Can one of you wizards give me some guidance on this. I have read every book and Pub to the point where I am second-guessing myself. Quote Link to comment Share on other sites More sharing options...
jainen Posted February 27, 2012 Report Share Posted February 27, 2012 >>I put the amount of the gain thus far in column g<< According to the instructions, gain is determined by entries in columns e and f. Column g is only for adjustments, like if the 1099-S is wrong. >>if you sell land that is part of your homestead either 2 years before or 2 years after the sale of your main home; you can defer the gain<< That particular tax break was repealed 15 years ago. Your client may be able to exclude gain instead, but not if by "homestead" you mean 160 acres. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted February 27, 2012 Author Report Share Posted February 27, 2012 Jainen, I was hoping you could help me. If I put nothing in Column g; Nothing goes anywhere. Is that because he is in a 15% tax bracket, or should some gain be calculated on the Capital Gains Tax worksheet? As far as the 2 year clause, I believe it is still in existence because I just read it in a 2011 book. In fact it is referred to in Pub 17, page 107. No, it is not a 160 acre homestead. It was 3.5 acres and the State took one acre for a roadway. Is it too good to be true that he would owe NO tax? I only put the gain in colume g to see what would happen. If I take it out, as I said, nothing happens and the sale of the land doesn't even come into play in his return. Is that correct? Quote Link to comment Share on other sites More sharing options...
jainen Posted February 27, 2012 Report Share Posted February 27, 2012 >>I just read it in a 2011 book<< No you didn't. >>I only put the gain in colume g<< Who cares about column g? What did you put in columns e and f? And yes, if he would otherwise be in the 15% tax bracket his tax rate for long term capital gain is 0%. Quote Link to comment Share on other sites More sharing options...
LindaB Posted February 27, 2012 Report Share Posted February 27, 2012 Enter the sale the way you think it should be, then go to the tax worksheet and follow it through carefully so you know that you're getting the correct result. With the Sch. D open click on 'Pages & Worksheets' and select 'Tax Worksheet (Sch D (1040), 8949). 1 Quote Link to comment Share on other sites More sharing options...
mcb39 Posted February 27, 2012 Author Report Share Posted February 27, 2012 Enter the sale the way you think it should be, then go to the tax worksheet and follow it through carefully so you know that you're getting the correct result. With the Sch. D open click on 'Pages & Worksheets' and select 'Tax Worksheet (Sch D (1040), 8949). Thank you so much Linda. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.