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Anne
Anne, Master Tax Preparer
Category: Tax
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I recently sold dirt to the DOT for a new highway project.

Resolved Question:

I recently sold dirt to the DOT for a new highway project. The barrow pit is rather large and will never be farmed again. Is there a tax write off, depreciation schedule or some other credit I can apply for?
Submitted: 4 years ago.
Category: Tax
Expert:  Anne replied 4 years ago.
Hi Jacustomer-rr6upiof

Thank you for using justanswer. If I'm following your question, you sold dirt from some land that you owned. That means that you have some sort of basis in the dirt (even though I know this may sound a little strange, since most of us don't normally consider dirt as necessarily have a cost basis, however, its really no different than if you have sold timber that stood on the land)

I would think that you could arrive at a reasonable cost basis of the dirt by asking a Realtor what the land would have sold for before the dirt was removed, and what that particular piece of land might be worth now that the dirt has been removed, and the difference would be your cost basis. (You will need to keep good records in case you decide you actually want to sale the actual piece of property at a later date, and you won't want to "double dip" on the cost basis)

If you are in the business of selling dirt, then you would report the sale on 2009 Form 4797Sales of Business Property .

If this was a 1x sale, then you would report
sale on 2009 Form 1040 (Schedule D,

In either case, you would only pay tax on the difference between your cost and the sales price, plus if you owned the land (and the dirt) more than 1 year, the profit would be taxed at the more advantageous capital gains tax rate (maxed at 15%)

I hope this helps.
Customer: replied 4 years ago.
I need more information as to how to claim it and only pay the 15%. I claimed it on last year's taxes and it raised my tax rate as it was considered income and not capital gains. We have more that will be added this year so I'm anxious to know if I can claim a refund from last year and how to do this year. Hope I've been clear with my explaination. Don
Expert:  Anne replied 4 years ago.
Hi Don

You may amend last year's tax year by filing Form 1040X Amended U.S. Individual Income Tax Return to take advantage of the 15% capital gains rate.

You will need to include either the 2009 Form 1040 (Schedule D, or the 2009 Form 4797 whichever applies. This form can be tricky due to its new format, so you may need to find a CPA, Enrolled Agent, or other professional tax pro familiar with the form to either prepare it for you, or walk you thru the steps of preparing it.

I hope this helps, and best of luck to you.










Edited by Anne on 6/2/2010 at 4:15 PM EST
Customer: replied 4 years ago.
Since I am away from home at this time I will not be able to follow thru on your advice until next week. Thank you. I'll get back to you then.
Expert:  Anne replied 4 years ago.
No Problem. Thank you for letting me know, and I'll be around if you have any follow up questions.
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1821
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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