I sold vacant land (at a loss) that I owned for 18 years. I don't get any "loss credit"? Thought I would get $3,000.00

[1a1]

Tom - do you know how long you can extend the $3,000 loss - we will have a $12,000 loss if we sell our vacant land - could we deduct $3,000 a year?

[TomYoung]

The mechanics of the situation work like this:

First, short term gains and losses are netted, resulting in a short term gain or loss depending on the numbers.

Second, long term gains and losses are netted, resulting in a long term gain or loss depending on the numbers.

If you have a gain in one category, (long term/short term), and a loss in the other category, then those numbers are netted. 

If the result of all that is a capital loss, then $3,000 of the loss can be subtracted from all other income - salary, dividends, interest, etc.  If there's still capital loss available after that it's carried forward to the following tax year and the cycle of netting begins again.

The process is completely mechanical, you have no options or elections to change these mechanics.

[1a1]

Thank you for the info - helpful!

[JGF40]

A slight variation on the original theme....

I sold vacant land at a loss after holding it 9 years. I never intended to build upon it, just keep it in the hope it would appreciate in value. It was in a new subdivision about 30 miles from my primary residence.

Is this classed as personal use or investment?

[JohnB5677 · Accepted solution]

Vacant land (Unless it is adjacent to your home) is considered an investment and should be treated as a capital asset.

In TurboTax you would post it to the 

• Income
• Investments
• Stock, Mutual Funds ...

By entering dates, purchase price and sale price it will determine your Profit/Loss.

[chuckr1]

How bout if it's not adjacent but I camped on it and built a small shed?

[Hal_Al]

@chuckr1  What you describe is personal use property.  A gain is taxable, but a loss is not deductible, not even against other gains.

[MD50]

No it sat empty for 14 years. We bought it to build our home on but changed our mind.

[Hal_Al]

@MD50 If the property was originally purchased to " build our home", then the IRS may consider it to be personal use property. not investment property, and the loss is not deductible. See other replies above and this Reference:

https://www.washingtonpost.com/business/2020/01/15/writing-off-loss-sale-property-federal-income-tax...

That said, I'm of the opinion that once you made a decision not to build, and kept the property, the property was  converted to investment property and a loss is allowed. But the amount of the deductible  loss  may not be your actual loss. For your cost basis, you must use the lower of your actual cost or the fair market  value (FMV) on the date of conversion. Using an example: you bought a vacant lot in 2001 for $10,000. In 2005 the property was worth $8000 when you decided not to build. In 2020 you sold it for $7000.  Your capital loss is $1000 (8000-7000), not $3000 (10,000-7000).

@TomYoung  @TaxGuyBill  @Carl  Comments?

[njurkovi]

Tom, thank you for the clear explanation; I am in a similar situation and have a follow up question.

In my case I am claiming close to 60K in loss - so it will take take 20 years to take advantage of the deductions (3x20). To make the matter worse, my passive income is not even 3K per year (excluding stock, which I typically do not sell). My question is this - assuming that my passive income is around 2k (CDs etc), would it make sense to sell some stock each year (to show additional 1K profit) so that I can fully take advantage of 3k deduction , as small as it is. Otherwise, I will probably be dead before being able to deduct the whole loss amount 🙂

Thanks!

[AmyC]

If you have no passive income at all, you can claim the $3,000 loss each year. If you have a $2k gain then it will be offset plus you have a $3k loss. See Topic No. 409 Capital Gains and Losses | Internal Revenue Service.

@njurkovi

[njurkovi]

Thank you!

I didn't know that 3K is in addition to offsetting other gains.

So, would this be a plausible scenario (based on 60K loss)

year          passive income                      able to deduct

2021         2k  (CDs)                                         5k

2022         2k  (CDs)                                         5k 

....

2023         2k  (CDs) + 45k (stock sale)        50k

I would not necessarily structure it that way, but I just want to make sure I understood your point

I appreciate your help very much!

[AmyC]

Maybe, you can take a look at the sch D and see where it shows the carryovers as part of the formula. See  Schedule D (Form 1040) lines 6 and 14. I don't know where your carryovers are. If everything is long term, you are great. If everything is short term, you are great. Otherwise, netting the short and netting the long to create the final, can change the picture.

@njurkovi

[njurkovi]

Thanks, I will do that!

[uscholdm]

I'm in the same situation. I entered the sale of the raw land parcel that was not used for anything (so should count for investment, not personal use).  I entered the sale under 'Investment Income', then 'Stocks, ... Bonds, Other'. I did not see a way to enter "Land" and get the deduction. I never planned to do anything with the land.

I get to where I say I don't have a 1099-B and I enter item description, dates bought  & sold and cost and sale amount.  I don't see where to say it is land.