How do I determine long or short term capital gain? I added .2 acres purchased this year to 1.8 acres (bought 8 years ago). Now want to sell as 2 acre lot.

[taxquestion-2]

The cost of the new land .2 acres is $25000- sale just completed.  the 1.8 acres cost was $45,000 - it is 45% part of our existing property purchased 8 years ago and is being partitioned off with the newly purchase property as a 2 acre lot.  We spent $25000 on zoning process to meet county minimum lot size of 2 acres and other requirements.

Would like to sell soonest but want to know tax liability before I jump at offers on table.

[MinhT · Accepted solution]

You should prorate the sales price between the first lot and the second lot based on the acreage. 

The cost of the zoning process can also be prorated between the two lots and added to their respective cost bases.

Capital gains on the first lot are long-term. Those on the second lot are short-term.

[taxquestion-2]

Wow that was fast- thank-you Minh T.   Your reply makes perfect sense.  Is there an IRS code or form I would use to submit the math?  The 8949 document is pretty sparse.
Thanks again.

[taxquestion-2]

And by the way, the smaller lot works out to a net loss - over 11K due to cost of lot per acre.  I am wondering if that can be deducted that same year?

[MinhT]

Yes, if the smaller loss has a capital loss, it will offset the capital gain of the bigger lot in the same year as the 2 lots are sold together.

[MinhT]

This is no IRS document dealing with your transaction, This is exactly like selling at the same time two lots of stocks bought at different times at different prices.

[taxquestion-2]

Thank you again- truly appreciate the help.

[MinhT]

You're welcome.