topic Vacant land in Get your taxes done using TurboTax

Vacant land

dodgeguy — Mon, 10 Feb 2020 03:33:29 GMT

We purchased land in 2004 for $33000 and was going to build. We found out that we couldn't put a big enough shop on it so we just kept it and sold it for $62000 in December. We finally found a big enough piece of land and purchase it for the price of $65000. Do we need to submit this and what paper work do we need.

Re: Vacant land

VictoriaD75 — Mon, 10 Feb 2020 04:51:00 GMT

Assuming the land was a personal asset, you need to report the sale of the land, as it will be considered taxable capital gains. Under the Federal menu on TurboTax Online, click Wages & Income. Expand the menu for Investment Income. Click Start/Revisit next to Stocks, Mutual Funds, Bonds, Other. Either Add more sales or begin answering the questions on the screens provided.

In Tell us more about this sale, you can enter Land or the address. Click Continue. Land is one of the options in the What type of investment did you sell? dropdown menu. From there, continue entering information about the land sale. Unless the purchase of the new land was a business asset, it does not need to be recorded until the year of sale.

The gain on the sale of the land will be reported and taxed as capital gains on Form 8949 and Schedule D.

Re: Vacant land

MG1968 — Wed, 19 Feb 2020 00:57:13 GMT

Hi,

Same situation here. i bought land to build on 2008 for $79000 , we changed our mind and sold it in 2020 for $110000 . had the land for more than 10 years, each year i paid property tax and HOA for around $2500 . this means i am even after i sold my land. can i add the properties taxes and HOA to the total cost of the land ?

Thanks,

Re: Vacant land

DaveF1006 — Wed, 19 Feb 2020 01:32:53 GMT

Please review this Turbo Tax link, as it relates to HOA fees. From what i am to interpret, the HOA fees that were paid at the time of the purchase.can be added to the basis but not for the ten years you owned the property. You can enter these as other investment expenses, which are itemized expenses if you are able to itemize.

Also property taxes paid during those ten years on your land could have been claimed as investment expenses as well.. You would not be able to claim those expenses for the entire ten years unless you amended your last ten years of tax returns. To claim for this year though, go to federal>deductions and credits>all tax breaks>Other Deductions and Credits>show more>Other Deductible Expenses>start>scroll through the question until it asks Did you have any of these less common expenses? here you would enter your investment expenses, which would include your HOA fees or property tax for this year.

Keep in mind, there is no authority that suggests that you add property taxes to the basis of your property.

Re: Vacant land

JDM3 — Thu, 30 Apr 2020 21:32:41 GMT

I purchased a vacant half acre lot 26 years ago for 2,500 and just sold it last year for $10,000. During that time, I had to pay for a survey and attorney for a law suit to maintain a legal right of way which cost $4,000. I also paid $1,300 in property taxes during the time I owned it. My question is are any of these things deductible in my capital gains tax? All together, I have $7,800 into the property and am hoping some of the expenses are deductible.

Re: Vacant land

JDM3 — Thu, 30 Apr 2020 21:47:21 GMT

Hi Dave,

I'm a new member and not familiar with protocol of replies but wondered if you have time if you could read my post that falls under this post (Concerning the sale of vacant land). Thanks!

Re: Vacant land

VictoriaD75 — Fri, 01 May 2020 17:36:46 GMT

The attorney fees related to the right-of-way lawsuit are not deductible. They are separate from the sale. The survey is deductible. The property taxes are deductible as itemized deductions and cannot be included as selling expenses.

Sales expenses include most items that would not be separately deductible on your taxes or loan fees.

Sales expenses include:

- commissions

- appraisal fees

- broker's fees

- legal fees

- advertising fees

- home inspection reports

- title insurance

- transfer taxes or fees

- geological surveys

- loan charges (points) or other fees paid on the buyer's behalf

Sales expenses do not include:

- mortgage payoffs or interest

- home equity loan payoffs

- rent-back costs

- payoff to creditors

- property taxes

- home owner association fees

Re: Vacant land

JDM3 — Sun, 03 May 2020 10:31:25 GMT

Thanks very much Victoria,

Can you tell me where you would list the survey expenses and the property taxes on the TurboTax form? Where do you list the itemized deductions? I appreciate your help.

JDM3

Re: Vacant land

Hal_Al — Sun, 03 May 2020 11:17:46 GMT

@VictoriaD75 's reply answers @JDM3 's question.

But, for other's reading this, the answer to all tax questions is: "it depends".

If the property was classified as investment property, as opposed to personal use property, prior to 2018, investment expenses were deductible, in the year occurred, as an itemized deduction, subject to the 2% of AGI threshold. That deduction is no longer allowed.

Alternatively, then and now, taxpayers can elect to capitalize (add it to your cost basis) the carrying costs of unimproved and nonproductive real property, real property under development or construction and personal property before its installation or use (Regs. Sec. 1.266-1(b)(1)). The election is made with the tax return by its due date, including extension, by attaching a statement. You cannot wait until you sell the property, but must make that election each year. Attach the statement to the return and write “Filed pursuant to section 301.9100-2” on the statement. You may add the carrying costs, incurred in the year of sale, to your cost basis.

Mortgage interest is only deductible to the extent of other investment income and not subject to the 2% of AGI rule, but can be capitalized. You cannot amend prior year returns to claim capitalization.

Re: Vacant land

Hal_Al — Sun, 03 May 2020 11:27:27 GMT

I think @VictoriaD75 's answer assumed the survey cost was part of the acquisition cost, so it would be added to your cost basis.

However, if the survey cost was part of the "maintain the right of way" problem, then it is not deductible.

Only the current year property tax is deductible. If you usually use the standard deduction, there's no need to enter it. It's not enough to make itemizing better than the standard deduction.

Re: Vacant land

Tronathan — Sat, 21 May 2022 21:07:40 GMT

I see conflicting answers for this. @DaveF1006 says you would need to amend your previous ten tax returns (although How to amend (change or correct) a return you've already filed (intuit.com) says you can only go back three years) while @Hal_Al says you cannot amend to claim capitalization. Anyone know which is correct? I am in a similar situation with vacant land and I have just seen this option after filing this year. Bummed that Turbo Tax didn't prompt me after entering in my property tax total. (Used home and business desktop edition.)

Re: Vacant land

Anonymous_ — Sat, 21 May 2022 21:20:56 GMT

@Tronathan

You need to provide more details. Your post was tacked on to a very old thread.

Regardless, with respect to "going back three years", that is the maximum length for which you can file and receive a refund. Of course, you can file returns as far back as is necessary, but you will not receive a refund (even if one is due) pas that three-year time period.

Also, as has been mentioned, miscellaneous investment expenses are no longer deductible and, as a result, cannot be added to the basis of the property.

Re: Vacant land

Tronathan — Fri, 22 Jul 2022 04:38:12 GMT

@Anonymous_

Thank you for your message. Sorry for not being clear and for the late reply. Basically, I have raw land and wanted to know if I can amend previous year's tax returns to include the statement that I would like to have the property taxes added to the cost basis of the land. If so, how far back can I go? Thank you

Re: Vacant land

TomD8 — Fri, 22 Jul 2022 13:38:56 GMT

@Tronathan --

I recommend you read this web article which may help answer your question:

https://www.taxaudit.com/tax-audit-blog/can-i-deduct-all-real-estate-taxes-on-a-piece-of-land-sold

Re: Vacant land

Anonymous_ — Sun, 14 Aug 2022 14:04:27 GMT

@Tronathan wrote:

@Anonymous_

....I have raw land and wanted to know if I can amend previous year's tax returns to include the statement that I would like to have the property taxes added to the cost basis of the land. If so, how far back can I go?

The Regulation that permits a taxpayer to elect capitalization of certain expenses is at the link below.

https://www.law.cornell.edu/cfr/text/26/1.266-1

As you have most likely already read, there is a requirement that the election be made by filing a statement with the original return for the year for which the election is made.

See https://www.thetaxadviser.com/issues/2020/jun/elective-capitalization-tcja-planning.html

Re: Vacant land

Tronathan — Sun, 14 Aug 2022 08:22:49 GMT

@Anonymous_

@TomD8

@Hal_Al

Thank you for your responses. This is all great information but what I am looking for really is something more specific. I get the idea that what I would need to do is fill out a letter stating that I wish to add the property taxes to the cost basis for 2022 taxes and add it as some kind of additional page when I submit my Turbo Tax efile. This is what I am planning to do and what I hope will work. The greater unknown though is how to do this retroactively and if that will work. No one seems to know what to do or how this works specifically. My guess would be to use a previous version of Turbo Tax and do the same but with a tax amendment page 1040-X also included. Before doing all this though, it would be nice to know first if it will work and if so, how far back it will work, instead of just doing it and being hopeful. Thanks for any help in advance.

Re: Vacant land

Anonymous_ — Sun, 14 Aug 2022 14:14:35 GMT

See https://www.law.cornell.edu/cfr/text/26/1.266-1

§1.266-1(c)(3)

If the taxpayer elects to capitalize an item or items under this section, such election shall be exercised by filing with the original return for the year for which the election is made a statement indicating the item or items (whether with respect to the same project or to different projects) which the taxpayer elects to treat as chargeable to capital account.

[emphasis added]

@Tronathan

Re: Vacant land

Tronathan — Mon, 15 Aug 2022 05:36:02 GMT

Thanks @Anonymous_ for your reply. When it says "original return", you are saying that there is not a way to file an amendment for previous year taxes? Is this what you are suggesting? I have seen some people say it can be done and others saying it can't so any clarification or confidence in the answer is much appreciated. Thanks again.

Re: Vacant land

Anonymous_ — Mon, 15 Aug 2022 13:45:14 GMT

Although the language in the Regulation is fairly clear, exceptions can be made (and have been made).

A PLR (link below) allowed the taxpayers to make the election in a later tax year because they "relied on a qualified tax professional and the tax professional failed to make, or to advise the taxpayer to make, the election".

https://www.irs.gov/pub/irs-wd/201607005.pdf

Note that an exception can be made where the "taxpayer failed to make the election because, after exercising reasonable diligence (taking into account the taxpayer's experience and the complexity of the return or issue), the taxpayer was unaware of the necessity for the election".

Re: Vacant land

Tronathan — Tue, 16 Aug 2022 06:06:21 GMT

Thanks again @Anonymous_

I don't know how to file for exceptions or if it would be worth it in my situation. I used TurboTax Home and Business and did not see anywhere to add this to cost basis over the past 7 years or so. I happened upon this information from searching around on the web to find that it was an option. Would someone at TurboTax be able to help me figure out the best course of action for my situation? Do you know who to contact? Thanks