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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?
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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.
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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

Yes. 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
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Often, the valuation for real estate tax purposes will be used as the basis for proration.

Rip
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