I am selling part of my land to a neighbor what is my capital gains situation?

[aumob]

I am selling part of my land to a neighbor (who built over the property line). I have lived on the property for 6+ years.  The amount of land is 0.2 acres, how do I figure out what my capital gains tax will be?  Is there a better way to handle this than a straight sale?

[Opus 17]

It's not a taxable gain.  You will reduce your property's cost basis instead.

For example, suppose you originally bought the property for $200,000 and you are selling a strip of land for $20,000.  You would report that as a sale with no gain--say that your cost basis was also $20,000.  Then, if and when you sell the rest of the property, you would list the cost basis as $180,000 (reduced by the amount of the sale of the strip.)  That may result in more taxable gain later but none now. 

[aumob]

Thanks for the quick reply, concise, and well-thought-out reply!