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Marvin,EA
Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1672
Experience:  Enrolled to Represent Taxpayers Before The IRS
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My father is 74 yrs old and retired. He was offered ...

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My father is 74 yrs old and retired. He was offered $50,000.00 for a portion (approximately 1/8 of his 2.5 acres) of his property so that the people behind him can access there property (they are landlocked). No buildings or home will be part this sale. Where does he stand as far as capital gains. His plans for the money would be to pay off his home.
Submitted: 8 years ago.
Category: Tax
Expert:  Marvin,EA replied 8 years ago.
Hello and thank you for using Just Answer. Your father will pay long-term capital gain on the profit of the land. Profit is determent by subtracting the price he paid for the land from the $50,000. The profit is tax at 15%
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Customer: replied 8 years ago.
Reply to Marvin,EA's Post: Even though he is going to use it to pay off his house he will still have to pay capital gain? And he bought his property with a home on it 35 years ago. How would you break that down?
Expert:  Marvin,EA replied 8 years ago.
If you father only going to sell land and his principal residence is not being sold any gain from the sale of the land is subject to long-term capital gain tax. He will take the total amount he paid for the land multiple by 0.125 ( price paid for 2.5 acres x 0.125 = purchase price for 1/8 acre) You will subtract the purchase price from the $50,000 to determent the profit on the sale of the 1/8 acre of land which is tax at the long-term capital rate of 15%.
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