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I understand that the new capital gains laws for real estate allow a couple to exclude the first $500,000 profit on sale of a home if they have lived in it for 2 of the past 5 years. Our home, which we have lived in continuously for the past 11 years, is on 70 acres in Virginia. The land is legally divided into two parcels because it is bisected by a county road. However, we purchased the two parts together and have treated it as one property. Our horses and sheep are grazed on both sides of the road, for example. We are not farmers, just keep critters for fun, and haven't depreciated fences and barns etc.
My question is whether the entire property (which will bring about $200,000 with a tax basis of $90,000)can be excluded from capital gains. Does the fact that the land is in two parcels in the deed book affect the situation if the two parcels are sold together? Does the situation change if the two pieces are sold separately? If we were to further subdivide, to sell the house with a minimal amount of land, do the remaining parcels sold without a house become commercial/investment property and subject to capital gains?
And finally, does the purchase price of our next house affect the tax situation for this one? The property we are looking at is 20 acres with a historic mill which we would like to renovate as a house. It already has a barn and fencing for our sheep and horses. It is being offered at $85,000 but we will need to put the balance of our money into renovation and construction. Is there a way to structure our purchase so that the two properties are more comparable? Or does this matter any more?
Thank you!
My question is whether the entire property (which will bring about $200,000 with a tax basis of $90,000)can be excluded from capital gains. Does the fact that the land is in two parcels in the deed book affect the situation if the two parcels are sold together? Does the situation change if the two pieces are sold separately? If we were to further subdivide, to sell the house with a minimal amount of land, do the remaining parcels sold without a house become commercial/investment property and subject to capital gains?
And finally, does the purchase price of our next house affect the tax situation for this one? The property we are looking at is 20 acres with a historic mill which we would like to renovate as a house. It already has a barn and fencing for our sheep and horses. It is being offered at $85,000 but we will need to put the balance of our money into renovation and construction. Is there a way to structure our purchase so that the two properties are more comparable? Or does this matter any more?
Thank you!