Let's say you purchase 10 acres of land 30 years ago for $10,000 and that 10 years ago the city declared eminent domain on a portion of the land and built a road through it. Now you own two tracts of land on either side of the road - each tract smaller than the original tract and let's say someone offered to both of these two tracts for $1,000,000 each.
How would capital gains tax work at that point? The land that's being sold isn't the same land that was purchased - it's less. Would you pay capital gains on $990,000 x 2?