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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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I purchased 44 acres earlier this year for $62,000. I have

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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 6 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 other Tax Specialists are ready to help you

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