State purchase of right-of-way easement. First time having one of these. Are they exempt?

[susiehursh]

My client's business property is being purchased by the state for an easement.  Not sure how to handle.  They are only take a part of the property for road expansion.

[BobKamman · Accepted solution]

If all they are buying is an easement, they are not taking the property.  Although it might look like it.  You reduce the basis of the property -- maybe the whole parcel, maybe just that part, it depends on the facts and circumstances.  If the payment exceeds the basis, the rest is capital gain.  And keep track of all this in case the property is sold 20 years down the (easement) road.  

[susiehursh]

 You sooooooo much.  My search of the IRS website didn't do much for me!!

[IRonMaN]

And he means the basis allocated to land, not any buildings that might be on that parcel.

[BobKamman]

I don't know if that's what I mean.  What if the easement cuts off access to the front door, so now the building is only accessible through the back door?  Again, depends on the facts and circumstances.  

[IRonMaN]

"I don't know if that's what I mean."

I heard that happens more often as you get older 😉