Air Space Easement

[islandnomadgirl]

I just bought my home on 8 acres at the end of last August - 9 months ago. At the end of my road, approximately 1/4 mile, there is a Navy outpost flying facility. The practice flying and fly low and directly over our property. The Navy and our city have a program that they will purchase your air space for a restrictive easement. We are currently waiting on the land assessment to be completed to find out what they will offer, but our neighbor with 5 acres was offered 15K an acre. Several questions What are the tax implications? No one seems to have a clear answer on what we can expect. If we close on the agreement before I've owned it for a full year, will it mess me up for capital gains? I'm getting a million different answers. Some say it's taxed as income but others it's only capital gains because it's a permanent easement.

Also, since I do have a mortgage, does the bank need to be notified and have them approve the easement deal?

Thank you!

 

[quincy]

I just bought my home on 8 acres at the end of last August - 9 months ago. At the end of my road, approximately 1/4 mile, there is a Navy outpost flying facility. The practice flying and fly low and directly over our property. The Navy and our city have a program that they will purchase your air space for a restrictive easement. We are currently waiting on the land assessment to be completed to find out what they will offer, but our neighbor with 5 acres was offered 15K an acre. Several questions What are the tax implications? No one seems to have a clear answer on what we can expect. If we close on the agreement before I've owned it for a full year, will it mess me up for capital gains? I'm getting a million different answers. Some say it's taxed as income but others it's only capital gains because it's a permanent easement.

Also, since I do have a mortgage, does the bank need to be notified and have them approve the easement deal?

Thank you!

What is the name of your state, Islandnomadgirl?

 

[islandnomadgirl]

Sorry!! Florida

 

[LdiJ]

I just bought my home on 8 acres at the end of last August - 9 months ago. At the end of my road, approximately 1/4 mile, there is a Navy outpost flying facility. The practice flying and fly low and directly over our property. The Navy and our city have a program that they will purchase your air space for a restrictive easement. We are currently waiting on the land assessment to be completed to find out what they will offer, but our neighbor with 5 acres was offered 15K an acre. Several questions What are the tax implications? No one seems to have a clear answer on what we can expect. If we close on the agreement before I've owned it for a full year, will it mess me up for capital gains? I'm getting a million different answers. Some say it's taxed as income but others it's only capital gains because it's a permanent easement.

Also, since I do have a mortgage, does the bank need to be notified and have them approve the easement deal?

Thank you!

I would certainly try to make the argument that its not taxable income at all, that its compensation for the reduction in the value of your property, due to the easement. Your basis in the property would be reduced by the payment.

I do not think that you need to notify the bank, since they would not have the authority to approve or disapprove of the easement.

 

[TigerD]

You might want to give some thought to what that will fo to your resale value. And I disagree - the lender will want to know about something that potentially destroys the value of their security.

TD

 

[islandnomadgirl]

You might want to give some thought to what that will fo to your resale value. And I disagree - the lender will want to know about something that potentially destroys the value of their security.

TD

They are going to fly regardless - I was even warned about it from the previous owner. They are doing it to keep from everyone selling out to a builder to do a subdivision and also to keep everyone happy because of the noise.

And I know everyone says this, but I plan to be here until my dying day...

Also, yesterday I asked the girl that works for the lender that originally held my mortgage before selling it and she said no, I didn't need to inform the lender. Hopefully I can get in with a RE Attorney soon and they can help guide me.

 

[Zigner]

They want to pay YOU for that? I'd pay THEM for the daily airshow

 

[islandnomadgirl]

They want to pay YOU for that? I'd pay THEM for the daily airshow

Don't get me wrong, we LOVE the sound of freedom...except when you go to bed at 11 pm and they're still flying doing touch and gos... The helicopters have been so close and low we can see the pilot control panel lights.

 

[Zigner]

Don't get me wrong, we LOVE the sound of freedom...except when you go to bed at 11 pm and they're still flying doing touch and gos... The helicopters have been so close and low we can see the pilot control panel lights.

I could sleep like a baby with that

(Sorry, I know this doesn't address your question...I just love airplanes of all types)

 

[NIV]

I would certainly try to make the argument that its not taxable income at all, that its compensation for the reduction in the value of your property, due to the easement. Your basis in the property would be reduced by the payment.

I do not think that you need to notify the bank, since they would not have the authority to approve or disapprove of the easement.

While I think the answer depends on more facts, I don't see any scenario where there is no taxable income at all.

If it handled in a normal way many easements are, the amount realized should reduce the basis on the property. I might have to do some research to see if the property would be reduced as a whole or if specific basis of some portion of the property is reduced when the easement is for air space with the rest being treated as a capital gain.

It is possible, depending on the easement and the rights retained by the OP, there is a simple sale of the air space. Then the basis of that space would be calculated to reduce the amount realized and it would be treated as a capital gain.

If there is a demand for a sale from the government, there may be a treatment under condemnation calculations for the gain or loss.

 

[islandnomadgirl]

I could sleep like a baby with that

(Sorry, I know this doesn't address your question...I just love airplanes of all types)

Here's an example from just a few weeks ago. It's like this one after another.

https://www.youtube.com/watch?v=Nsh8hycelbI

 

[LdiJ]

You might want to give some thought to what that will fo to your resale value. And I disagree - the lender will want to know about something that potentially destroys the value of their security.

TD

Its the Navy...there is nothing the bank can do to stop them flying or to stop the easement. If it was a private situation then yeah, the bank might have some say so, but its not.

 

[LdiJ]

While I think the answer depends on more facts, I don't see any scenario where there is no taxable income at all.

If it handled in a normal way many easements are, the amount realized should reduce the basis on the property. I might have to do some research to see if the property would be reduced as a whole or if specific basis of some portion of the property is reduced when the easement is for air space with the rest being treated as a capital gain.

It is possible, depending on the easement and the rights retained by the OP, there is a simple sale of the air space. Then the basis of that space would be calculated to reduce the amount realized and it would be treated as a capital gain.

If there is a demand for a sale from the government, there may be a treatment under condemnation calculations for the gain or loss.

The OP stated that the Navy was paying a specific amount per acre for the entire acreage. That would tend to indicate that the Navy wishes to use all of it. If its an easement, its merely going to reduce the basis in the property and be non-taxable. It does not appear to be a sale of the airspace at all. The OP specifically used the term "easement".

 

[Zigner]

Here's an example from just a few weeks ago. It's like this one after another.

https://www.youtube.com/watch?v=Nsh8hycelbI

You've got me drooling now

 

[islandnomadgirl]

The OP stated that the Navy was paying a specific amount per acre for the entire acreage. That would tend to indicate that the Navy wishes to use all of it. If its an easement, its merely going to reduce the basis in the property and be non-taxable. It does not appear to be a sale of the airspace at all. The OP specifically used the term "easement".

Correct - they want a "Restrictive Easement" on all of it. And this program (3rd time it's been offered) is funded 75% by the DoD and 25% grants from our City. It is a permanent easement (as opposed to "leasing it for x amount of years). I have a copy of the easement they sent to me that they were preparing for my neighbor.

So it's more of compensation, however, the easement will be tied and passed down should I ever sell.