Capital Gains tax on the sale of my vacant land in Michigan

Question

Good afternoon,

I have a question regarding the Capital Gains tax I will have to pay on the sale on my vacant hunting land I sold in Michigan in 2016.

I owned the property for six years and from what I have researched I will will owe 15% because I owned the property longer than one year.

I purchased the property for $28,500 and sold for $68,000.

• First question can I deduct from the $39,500 in gains the improvements I made on the property in the six years I owned it?
• Second question I took some of the money and built a pole barn/garage at my primary residence as a improvement can I deduct the cost of this barn from the gains?

Thank you...

Answer 1

You are talking about adjusting the basis of your property which has its own IRS publication Publication 551: Basis of Assets

Assuming you've not taken depreciation on your land in any way, pages 4-5 cover the various ways you can increase the basis of your property. Improvements like paving and wiring such as your second case would increase the basis of the property and reduce your gains when you sell.

Note that regular real estate taxes do NOT alter your basis.

Again the IRS publication is where you should look on what activity would have altered your basis during your period of ownership.

Consult appropriate accounting and legal practitioners when in doubt.