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I am receiving a view mitigation settlement of $150,000 from

a company developing property next...
I am receiving a view mitigation settlement of $150,000 from a company developing property next to my home. Is this taxable income or could it reduce the basis of my residence when I sell the home. I plan to sell within a few months of receiving the settlement. Since the settlement reimburses me for my loss of FMV due to no longer having a view I hope to offset my cost basis.
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Answered in 3 minutes by:
7/4/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

Only the amount of settlement that is above and beyond your basis of the property

MyVirtualCPA :

would be taxable/

MyVirtualCPA :

Therefore, this settlement reduces your basis in the property

MyVirtualCPA :

I'm sorry that you lost your view...where is your property - is it waterfront?

Customer:

Can you point me to a IRS reference for this treatment?

MyVirtualCPA :

I am looking for something for you, I just know that in the event the settlement is compensatory, only if the settlement exceeds your basis is any amount taxable

Customer:

I need to somehow back that up with an example or publication, code section, court case, etc. "just knowing" doesn't really work. You haven't really helped me if you can't point me in the direction that this advice comes from.

MyVirtualCPA :

I'm reading the audit guide now, to see if there's a similar instance

MyVirtualCPA :

The audit guide was no help, but publication 4345 deals with this

MyVirtualCPA :

http://www.irs.gov/pub/irs-pdf/p4345.pdf

MyVirtualCPA :

Second page, very top says this plain as day

MyVirtualCPA :

Is there anything else that you need assistance with?

MyVirtualCPA :

Please let me know if you require further assistance. If not, please rate as "excellent" so that I may receive credit for assisting you today

Customer:

That's it. Thank you very much.

MyVirtualCPA :

You're welcome. Glad I could help. If you need anything else, if you need any tax, finance, or social security questions answered please ask for me directly

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified
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Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
16,581 Satisfied Customers
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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