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I have HUD-1 income from government for turning part of my land back into wetlands.

Forum|Forum|7 years ago
June 5, 2019
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TurboTax Deluxe Windows

Best answer by TaxGuyBill

The money you received first reduces the 'Basis' (cost) of the land.

So it seems like you originally paid about $190,000 for the land. You sold the easement for $131,149. So now your "Basis" (cost) of the land is lowered to about $58,851, and the amount your received is tax-free.

https://www.irs.gov/publications/p544/ch01.html#en_US_2016_publink100072263

If you did not receive a 1099-S (it is sometimes in the 'closing' paperwork), nothing needs to be reported. If you did receive a 1099-S, you will need to report the sale of land (easement), using a cost of $131,149 (assuming that is what the 1099-S shows) and a selling price of $131,149, which will give you a $0 gain/loss. I think it is entered in the section where you sell Stocks, Bonds, Mutual Funds, etc..

Your new "Basis" for your entire property is now about $118,851 ($58,851 for the land and $60,000 for the building). Whenever you eventually sell (or rent out) the home, you need to use that number for your "Basis" (cost).

Carl11_2

Employee

Are you the buyer or the seller? (I'm not assuming the obvious - I want it to be clear) Is the land dealt with on the HUD-1 closing statement land that was a part of your primary residence, 2nd home, rental property or something else? Is the only thing dealt with on the HUD-1 raw land only? Or were there permanent structures on this land included in the transaction?

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1rebarrAuthor

I am the seller and it was raw land only no structures

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1rebarrAuthor

I only have one residence and the HUD-1 is from that residence.

Carl11_2

Employee

Okay, you got me now. Hey @TaxGuyBill I'm sure you get tired of me tagging you all the time. All I can say for sure is that this sale of residential non-investment land will not be reported in the Investments section. It appears to me that it also won't be reported in the Sale of Home (Gain or Loss) section either. So I'm stumped.

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1rebarrAuthor

Okay I appreciate your honestly so what do I do? it amounts to $131,149.00 so I have to be sure what to do.

Carl11_2

Employee

We just have to wait for someone more knowledgeable than me on your specific situation to jump in here is all. Give it a bit, as it shouldn't be to long. Remember, this is after all, a user to user support forum. There's thousands here, so someone will have the definitive response.

T

TaxGuyBill

Employee

I don't quite understand the situation or the question. Are you saying you lived in a house, and sold PART of that land to the government?

Did you also sell the house? Are you planning to sell the house within 2 years of the sale of the land?

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1rebarrAuthor

Okay great!!!! I'll just wait...thanks for your help!!!!!

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1rebarrAuthor

I didn't sell the house and the only stipulation with the land is I can't build on it or raise crops on it. I still own the land and pay the taxes on that land. I have owned the land and the house since 1999 and have no plans to sell anything. It is my only house.

T

TaxGuyBill

Employee

Okay, it sounds like you sold an "easement".

Next question (which can sometimes be difficult to figure out): Are you able to figure out how much you paid for ALL of your LAND?

For example, let's say you bought the entire property (land and buildings) for $500,000, and your current property tax records show that about 20% of your current total property valuation is for land. You could then estimate that 20% of your original purchase was for the land, making it as if you paid about $100,000 for your land..