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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2355
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I was married but got divorced August 2014. My spouse and

Customer Question

I was married but got divorced August 2014. My spouse and I had always filed a 1040 with farm income and deductions. In 2014 I filed a short form as I no longer have farm income or deductions.
As a result of the divorce, I got the family home and 50 acres. On this acreage are two barns. There is a power company that runs power lines across my place. They are in the process of upgrading the poles, expanding right of way, etc. They want my barns moved and are going to pay me to have them removed and rebuilt.
1. Since I no longer have farm income/expenses will I have to pay taxes on the money they give me for the cost of tearing down and relocating the barns?
2. If I didn't have both barns rebuild, but decided to replace with only one barn, will I pay taxes on the amount over (if any) of what they gave me for relocation of both barns?
I make an average of $50,000 year salary. How much will taxes be on the amount they give me? The bid at this time if $51,000 for the relocation of the barns.
Submitted: 1 year ago.
Category: Tax
Expert:  Anne replied 1 year ago.
Hi ***** been a tax preparer for 27 years and I'll be helping you today.
Yes, you will have to report the TOTAL amount you receive the for the removal/relocation of the barns. Since you no longer farm the acreage, you will report this on line 21 of your tax return as "other income not subject to Se tax.
In answer to how much tax the $51000 bid will cost you see below: (This information is based on 2014 tax year figures, but it will absolutely be in the ball park.)
Scenario 1
$50,000 (wages)
Less $6200 Standard deduction
Less $3900 Personal Exemption
_______________________________
$39900 taxable income
TOTAL TAX FROM TAX TABLE ON $39900 IS $5613
Scenario 1
$50,000 taxable income
plus $51000 payment for relocation of barns
less $6200 standard deduction
less $3950 personal exemption
_____________________________
$90000 taxable income
TOTAL TAX ON $90000 IS $18313
So the additional tax on the $51000 is $12700
So the additional $51000 would cost you $12700 in tax
The reason the difference is so dramatic is because single filers pay more in tax than any other fling statuses except for people who file married filing separate.
The link to the tax table I used is below:
http://www.irs.gov/pub/irs-pdf/i1040tt.pdf
Only you can decide what you want to do, but if you divide $12700 by $51000, you get 25%. That is the additional tax amount.
That means you get to keep 75% of the $51000
I hope this helps
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