Q: I pd 250000 for farm . I now will sell part of land for 130000, is there cap gain tax or do u recover the 250000 first?
A:
When property is sold or exchanged you may be taxed on the gain. A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. Generally, the adjusted basis is the cost of the property. The amount you realize is defined as the money you receive plus the fair market value of property and services that you receive.
Also keep in mind that depending on the length of time that you held the property, the gain may be taxed as ordinary income or capital gains.
Because you are selling only a portion of your land, I would highly encourage you to contact a tax professional to determine what percentage of basis you are allowed to recover before you are taxed on the gain. Also, speak with a tax professional in determining what your holding period is for the land.
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