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Are business relocation payments taxable

Customer Question
Property is being acquired through...
Property is being acquired through an eminent domain action. As a part of the negotion, the owner has agreed to accept a certain value for the property. This amount includes relocation payments.
Submitted: 10 years ago.Category: Tax
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Answered in 17 hours by:
2/20/2007
Tax Professional: jgordosea, Enrolled Agent replied 10 years ago
jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3,161
Experience: I've prepared all types of taxes since 1987.
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If the agreement does not separately state an amount being paid for relocation I would include the entire settlement as proceeds from the sale/condemnation when computing gain or loss. The business will deduct all of the ordinary and necessary costs of the relocation.

If the agreement does separately state an amount being paid for relocation I would not include that amount as proceeds from the sale/condemnation when computing gain or loss. The business will deduct all of the ordinary and necessary costs of the relocation less the portion specified for relocation remimbursement.

The net result is similar since the reimbursement either increases the gain or reduces the expense.

Hope this fully answers the question.

 

jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3,161
Experience: I've prepared all types of taxes since 1987.
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