Cost basis is the original purchase cost of an asset (such as stocks, bonds, or property), plus any adjustments that result from transactions over the period you own the asset. Examples of adjustments would be an increase in valuation due to a property improvement or a decrease in valuation due to unreimbursed storm damage to the property.
When you sell the asset, your cost basis gets subtracted from the money you collect from the sale. Instead of paying tax on the full amount, you only get taxed on the profit (the selling price minus the cost basis).
See this response regarding reporting the transaction.
You should use the actual cost of the land that was sold, plus any expenses (real estate commissions, etc.) paid. If you only sold a portion of the land, for example - if you own 1 acre, and sell .33 acres, then you should allocate the original cost to the portion of land that was sold. You can use "any reasonable method" for the allocation - for example, 1/3 of the total cost; or if there are property tax statements that allocate the portions of land and provide their valuation, you can use that to pro-rate. As long as you can explain your method for allocation of the cost and it makes sense.
I currently live on a home located on the property. I'm unsure on what to list on the cost basis, we were required to sell 1,356sq ft of our front yard due to road expansion by the county. They provided a check for the land sold which I input on the proceed however I am unsure what to input on the cost basis. We still own the remainder of the property which the house is on.
Cost basis is the original purchase cost of an asset (such as stocks, bonds, or property), plus any adjustments that result from transactions over the period you own the asset. Examples of adjustments would be an increase in valuation due to a property improvement or a decrease in valuation due to unreimbursed storm damage to the property.
When you sell the asset, your cost basis gets subtracted from the money you collect from the sale. Instead of paying tax on the full amount, you only get taxed on the profit (the selling price minus the cost basis).
See this response regarding reporting the transaction.