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

susiehursh
Level 2

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.

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BobKamman
Level 15

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.  

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BobKamman
Level 15

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
Level 2

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

IRonMaN
Level 15

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


Slava Ukraini!
BobKamman
Level 15

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
Level 15

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

I heard that happens more often as you get older 😉


Slava Ukraini!