Taxes on an permanent easement

[Beau10]

I have a relatively complicated question about easement taxes.  I sold the corner of my lot to the city as a permanent easement.  I understand how to calculate the gain from that corner.  There are complicating factors though.  First I rent out a room in my house so some of my property is a rental and some is my permanent residence.  Secondly, there was an old permanent easement from the 1950s that I think was thrown in with my corner so that it would be a modern easement.  If I use the old and new easement square footage combined I lost money on the deal, if I simply calculate the corner part I owe money.  To further complicate things, I am not sure if I should use the total lot size or subtract the old easement square footage from the lot size when calculating purchase basis.  Maybe Im overthinking this...

[PatriciaV]

Since the basis adjustment from the sale of the permanent easement affects only the land, how you use your residence should not influence your cost basis calculations. Remember that land isn't depreciated.

If you owned the property when the previous easement was sold, the land basis should have been adjusted at that time. (You might need to verify this.) But if you purchased the property more recently, the property records at that date should have taken the earlier easement into account (because the easement no longer belonged with the property you purchased).

Your best option is to use the square footage as of the date you purchased the land (assuming the prior easement had been adjusted out). Calculate the percentage of the easement you sold and multiply that by the acquisition cost for only the land. The result is your basis adjustment and the offset for the easement sale proceeds.