Investors & landlords

Yes, this transaction may be reported as an Investment Sale, found under Wages & Income >> Investment Income >> Stocks, Mutual Funds, Bonds, Other.

The easiest way to find this section of TurboTax is to use Topic Search/List (either under Tax Tools in the left column of TurboTax Online or in the header of TurboTax for Desktop). Type in "investment sale", hit Enter and click Go to go directly to beginning of this topic.

1. Click Start/Update or "Add a Sale."
2. Type of Investment: Land
3. Enter a description, Net Proceeds (sales price less selling costs & commissions); date of sale.
4. Acquired: whatever method fits
5. Cost Basis: See below
6. Date of Acquisition: purchase date

The cost basis of the parcel you sold must be allocated from the entire amount you paid when you purchased the home and lot.

Most taxpayers use the assessed value provided on the property tax statement. Calculate the percentage of value that belongs to the land, then apply that percentage to the basis for your property. Finally, calculate the cost per square foot and apply that to the parcel you sold.

Example:

• Property Tax Assessment ($100,000 total): 
  • $80,000 for home & improvements
  • $20,000 for land
• Percentage of Land Value: $20,000/$100,000 = 20%
• Basis of Property (your cost plus improvements) = $150,000
• Allocated Basis of Land = 20% x $150,000 = $30,000
• Square footage: 
  • Total = 21,780 (1/2 acre)
  • Sold parcel (1/2 of lot) = 10,890 sq ft
• Cost per square foot = $30,000 / 21,780 = $1.38 per sq ft
• Cost basis of sold parcel = 10,890 sq ft x $1.38 per sq ft = $15,028