Last year, a portion of my property from my principal residence was seized through emminent domain. As this was involuntary on my part, I'd like to know how this is handled in my tax filing. No 1099s or such were received.
Answers
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So, would I need to file the amount received on my tax return since only a portion of the property was lost and it was involuntary? If so, what part of the tax return would it be filed under? Thanks for your quick response.
Expert
If you lost only a portion of the property, then technically you didn't gain on a sale, if you received money.
Down the road, the question will be what effect the seizure had on the value of your entire property. I found the following link about a partial property seizure:
http://www.snaiderlaw.com/practice-areas/condemnation-eminent-domain/
"In a partial taking of property, beyond the value of the square footage taken, often overlooked are such things as the effect of the project on the remaining property. This often results in a serious reduction in value of the property that remains."
If you have an appraisal done, you might be able to get a better idea of what effect the seizure has had on the value of the property.
About the Expert
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http://www.irs.gov/pub/irs-pdf/p551.pdf
"The amount you receive for granting an easement
is generally considered to be a sale of an
interest in real property. It reduces the basis of
the affected part of the property. If the amount
received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as
a recognized gain."
You would use Schedule D on Form 1040 if you need to report a gain.
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