How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask MequonCPA Your Own Question
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
Type Your Tax Question Here...
MequonCPA is online now
A new question is answered every 9 seconds

I purchased 44 acres earlier this year for $62,000. I have

This answer was rated:

I purchased 44 acres earlier this year for $62,000. I have incurred deductible expenses of $5,340 including survey, subdivison fees, soil work, closing costs etc., making my cost basis $67,340. I subdivided the land into 3 parcels and sold 2 of the parcels for $33,000 each, leaving me $1,340 of expense and 23.73 acres of land. Am I correct in assuming that I do not have to claim any short term capital gains since I have not "profitted" over my cost basis? If so, can I just hold the $1,340 "loss" for next year and pay long term capital gains on my sales price for the 23.73 acres minus the $1,340?

Hi and welcome to JustAnswer:


You need to allocate your costs on a per acre basis. Your basis in the acreage sold is $67,340/44*20.27 or $31,022.31. Your gain on the sales is $34,977.69 ($66,000 - $31,022.31)

Edited by Steven Meyerson, CPA on 1/3/2011 at 1:43 AM EST
Customer: replied 5 years ago.


So there is no way to claim no gain this year and 100% gain next year?

That's correct. Each acre is required to be allocated its proration of the basis.
MequonCPA and 4 other Tax Specialists are ready to help you

To confirm, See IRS Publication 551, page 4, subdivided lots.


Related Tax Questions