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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55147
Experience:  29 years of experience as a tax, real estate, and business attorney.
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we are selling our primary residence which is a farm. we have

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we are selling our primary residence which is a farm. we have lived there for 6 years and plan to use the capital gains exclusion. the buyers have asked us to split the farm into two separate parcels in order to get residential financing on the smaller parcel. they have asked us to value the remaining land at $1.00 so that the entire purchase price is placed on the home and the smaller parcel. this land is adjacent to the home and we have used it as part of our primary residence.

we are concerned about putting a $1.00 value on the land thinking that the IRS may not perceive this as legal and we also do not want to be audited due to any flags being raised.

should we be worried about this?

Good evening. The IRS is not going to honor this allocation. You have some flexibility, but this falls under the pigs get fat, hogs get slaughtered concept. You need to allocate the value pretty much along fair market value lines of each property.... you can be biased on way or the other a bit, but it needs to be reasonable.



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