Monday, December 6, 2010

How much tax is assessed on money pd. by the hwy. dept. for land attached for bldg. of interstate & damages.?

The roads dept. is extending an interstate hwy. in front of my property. They demanded a piece of my land, and made payment to me for it and for damages to land attached to the piece they took. The bank through which my land was mortgaged took 1/3 of the money.

You will have to figure the size of the entire property, divide in square feet and divide by the value of your property. Go with the value at the time of sale and not the amount mortgaged.

The only tax I can think of being involved would be a capital gains tax. If you paid $20,000 for some land, and the highway department paid you $25,000 for it, then you would owe capital gains tax on the $5000 gain.

So, it depends on your "basis" -- your carrying cost of the land that was sold.

You didn't ask, but in case this helps: the bank took some of the proceeds because you sold some of their collateral. That is perfectly ordinary. However, the amount a bank will require is often the subject of some negotiation. It depends on the value of what is left of what you own, relative to the balance on the loan.

Good luck.

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