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EMINENT DOMAIN

Forum|Forum|4 years ago
April 3, 2022
5 replies
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A client received compensation from the county/state for buying part of his land for road widening. He received a 1099-S he still owns his house and has not sold his home. So I am using form 4797 instead. I was thinking that I can allocate a portion of the adjustment basis of his property to the area taken by eminent domain. Can I also report how much the property would of been if sold in the future? Need some guidance on this one. So property was bought for $245,000.00 in 2009, is valued at apx. $400,000.00. He received $30k from the county/state. Client is trying to figure out how much it will be once they start widening the road. Thanks in advance.

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Best answer by dkh

I'll tell you how I've handled this type of transaction for my clients. I report on Schedule D - report the proceeds from 1099-S with a matching cost basis. Client will then have a reduced basis in their remaining property by the proceeds. No need to call the county/state/or Ghostbusters......

EDIT: CALL THE COUNTY/STATE/or GHOSTBUSTERS if you need but I'm betting your client has all the documents you need to make an informed decision on how to handle this transaction.

My apologies if my original answer was misleading.

qbteachmt

Level 15

Your client has a Land Sale.

It isn't clear what this means or the purpose: "Can I also report how much the property would of been if sold in the future?" Report where?

Don't yell at us; we're volunteers

1

1040shredderAuthor

Level 3

as in cost of basis of the property...

joshuabarksatlcs

Level 9

Taxation on eminent domain payments depends on the facts and circumstances. For example, does the owner retain the beneficial rights?

For what it's worth, see if this helps.

https://www.thetaxadviser.com/issues/2014/mar/kebodeaux-mar2014.html

Good luck.

I come here for kudos and IRonMaN's jokes.

1

1040shredderAuthor

Level 3

Thank you for the info. Client is going to touch bases with the county. He has no idea.

BobKamman

Level 15

Are you sure they didn't buy just an easement, not title to a strip of land? Have you seen the deed?

1

1040shredderAuthor

Level 3

He is unaware if the state made any changes to the deed yet. He will contact the county. thank you

qbteachmt

Level 15

There should be New Deed, to separate a sold portion from the unsold portion. Road activities typically buy the land, not just easement rights, because of liability issues, future improvement needs, runoff and other potential mitigation issues, right of way value, etc.

Don't yell at us; we're volunteers

R

rcooley25

Level 7

The only Eminent Domain I know of is with a divource where the eminent domain goes to the wife. She gets it all,

dkhAnswer

Level 15

I'll tell you how I've handled this type of transaction for my clients. I report on Schedule D - report the proceeds from 1099-S with a matching cost basis. Client will then have a reduced basis in their remaining property by the proceeds. No need to call the county/state/or Ghostbusters......

EDIT: CALL THE COUNTY/STATE/or GHOSTBUSTERS if you need but I'm betting your client has all the documents you need to make an informed decision on how to handle this transaction.

My apologies if my original answer was misleading.

BobKamman

Level 15

As I always say, don't allow missing facts to get in the way of a good negligence penalty.

I usually avoid saying it in public, though. IRS might be listening.

dkh

Level 15

@BobKamman Why do you always assume we don't know what we're doing? You are the one and only one smart enough to do this transaction correctly? Don't think so.

My answer was based on my experience with my clients and the paperwork presented to me. Did you see this paperwork - NO - so don't assume I'm being negligent.

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