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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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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).

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1rebarrAuthor

In 1999 I paid $250,000 for 150 acres and a small ranch house and a beatup old barn. I would guess the building were worth$60,000.00 tops. The land that was turned back into wet lands was 44.46 acres.

T

TaxGuyBillAnswer

Employee

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).