5 Replies Latest reply on Jan 10, 2014 12:55 PM by Radiodude

    No gain sale, do I need to report?

    Radiodude
      Purchased a parcel of land, intending to build a home there. Plans changed and after owning it for about ten years sold the land. After realtors commission, other sales costs, some improvements to the property, my net capital gains are zero. It was never a residence, so does not qualify for capital gains tax deduction on sale of residence. Since I did not make any capital gains on it, do I need to report the sale and list all the costs and income from sale to the IRS and state tax board?
        • Re: No gain sale, do I need to report?
          smaneck
          If you don't it may be assumed the selling price represents your capital gain. If you do report it you may even be able to claim a loss. 
          • Re: No gain sale, do I need to report?
            MyR Community Manager
            Radiodude,
             
            Thank you for creating a new discussion thread! We appreciate and enjoy your participation in the MyRetirement.org online community and look forward to your future contributions.
             
            • Re: No gain sale, do I need to report?
              jocee
              I would report the transaction just to be on record with the federal/state tax units.  If you sell a house with a net profit of over $250,000 for a single or $500,000 for a couple, you be taxed at the capital gain rate on the profit over those amounts.  If you sell a house at a net loss after purchase price, sales costs and any major renovations, you can not take a taxdeduction on the loss.  So you pay on gain but eat any loss.  Not sure how this applies to vacant land intended for residential use  but probably about the same. 
                • Re: No gain sale, do I need to report?
                  BigDogMom7
                  I'm a CPA.  You SHOULD report it, because the IRS has no way of knowing what your cost basis is.  At closing, a 1099 reporting the sales price should be prepared, so the IRS knows you sold something and what you sold it for.  But they do not know whether you had a gain or a loss.  You may received a bill from them assessing tax as though the entire sales price is a gain.
                    • Re: No gain sale, do I need to report?
                      Radiodude
                      Thanks for advice. Okay then I will report it and the "basis", what it cost me to own it in the first place and the cost of improvements.

                      To those suggesting property intended for a residence could get the $250,000/$500,000 capital gains tax deduction, only if it qualifies as a residence, which means it has a bathroom and a kitchen, AND you must have lived in it for two out of the previous five years.

                      A motor home can qualify as a second home when taking mortgage interest deduction. A piece of vacant land cannot.