I purchased two single-family lots for one price without any stipulation as to individual value. I sold one lot and built a home on the other. The one lot sold for almost what I paid for both lots after 3 years. What restrictions are there in setting the basis value of the sold lot. I would like to defer the bulk of the capital gains tax burden to the time when I sell the other lot and home on it. Would this be possible. In other words, if I paid $60,000 for two lots and sold one for $50,000, is there a problem setting the basis for the sold lot at say $45,000?
Not a pro tax person but, unless you can justify is some way (size, shape, landscape, terrain, etc.), you may during an audit have a problem.
In other words, if I paid $60,000 for two lots and sold one for $50,000, is there a problem setting the basis for the sold lot at say $45,000Yes. Your basis allocation must be reasonable. For unimproved property, the standard is division by area. If there are unusual features about one lot, you could probably make some adjustments, but I doubt you could reasonably get to the division you propose.Phil Marti
Often, the valuation for real estate tax purposes will be used as the basis for proration.Rip
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