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Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
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I am receiving $7,500 from a neighbor to allow a portion of

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I am receiving $7,500 from a neighbor to allow a portion of my land to be assessed by the city vs the county. How is this taxed, capital gains or ordinary income?
Thanks for using! I will do my best to provide you with a clear and concise answer to your tax question based on the information that you have provided.

In order for a transaction to be treated as a capital gain, a sale of a capital asset must have occurred. In your situation, you are being paid to have your property taxed by your city rather than your county, you do not have a capital gain transaction. Therefore the income from your neighbor will be taxed as other income on line 21 of your form 1040.

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