Had quadruple heart bypass surgery recently, so am seriously considering selling the pond acreage. We are okay financially without selling, but we rarely get out there anymore, and my wonderful wife isn't a huge fishing fan.

I want to thank the poster who suggested contacting realtor Cash McWhorter about the preliminaries. He has spent plenty of time looking over the property, and assessing it compared with similar properties in our local area. Honestly, I was shocked at how much values have gone up in the last few years! I mean, we've done a lot on the place, but sheesh.

Question: I know the government levies a capital gains tax on any money we receive that exceeds the costs. But what exactly can be included in the cost? For sure our initial purchase of the raw land, the building of the dam, the Redneck Palace (our term for a nice double wide) on site. But would that include the value of satellite TV? The furnishings in RP, such as sofa, chairs, table, beds? The dock? The pontoon boats? The feeders? The roads? The bridge? How about the fish stocked over the years? The cost of feeding them (I'm guessing not)?

Anybody know? If we don't pass along our places to our relatives because they aren't much interested, this decision is a real possibility. Would love to see a thread on it, and eventually a PB article.

I believe it depends on how good, or gutsy, your tax accountant is. You want one who is both.

P.S. My Dad had almost 20 good years after his quadruple bypass - hope you get the same or better.

anthropic, I hope your recovery is going well.

I agree with Theocity's comment about the accountant. Probably a lot of gray area there. These days, I'd be fine with gray areas, and would not be worried about having to defend my actions down the road if anything ever came up, tax-wise. I'd make the case that fisheries like this don't just 'exist.' They cost a lot of money and a lot of time.

The decision you have to make is on the path for all of us, so this is very interesting.

Thanks, Theo. Don't want to go too far near the edge of the ice, I've seen what happens to folks who think they will never get an IRS audit. My rough estimate is that permanent stuff we've added, like the dock, boats, roads, Redneck Palace, dam, bridge, will be part of the cost. Beyond that, will have to research.

Totally agree with Theo and Sunil.

Did you take any of your expenses on the improvements off of your income taxes on the years you made the expenditures? That would give you a rough accounting of the money you put in. If you did NOT take the expenses, I think that strengthens you significantly increasing your capital costs - and therefore reducing your gains realized at the sale.

But don't trust me on tax accounting! If you can't find an accountant that you feel is an expert on that topic, then it might be worth it to pay some hours to an actual tax attorney. Your place is beautiful, and I think it will sell for a ridiculous price. There may be a LOT of capital gains involved, and the proper treatment might be well worth the cost of a specialized attorney.

P.S. Since we have seen you back on Pond Boss, I hope that means your "ticker" is pumping blood at a satisfactory rate? If not, I am sure some of the aeration experts on the forum can send some ideas over to your cardiologist!

Hey, Rod. No, we never took expenses off our income taxes. There were very large expenditures for fish stocking, electro harvesting & surveys, liming, landscaping, irrigation system for our lawn & flowers. Hiring a crew to come out weekly to mow & care for our shrubs, flowers, etc has been a significant expense, too. Also controlled burn to help trees -- we grow timber but haven't sold it yet.

If you add it all up, the expenses are very large. Hopefully my tax accountant will pay heed, and my wife never finds out how much.

P.S. Since we have seen you back on Pond Boss, I hope that means your "ticker" is pumping blood at a satisfactory rate? If not, I am sure some of the aeration experts on the forum can send some ideas over to your cardiologist! grin

Just noticed your PS, Rod. My ticker is doing well, thanks for asking. But I'm bedeviled with C. difficile, a common experience of folks who are under stress and take broad spectrum antibiotics.

As an economist, I know that incentives matter much more than intentions. In this case, I had C diff symptoms for a couple of weeks, but the rehab center doctors & nurses kept saying it was due to a change in medications. Lost 38 pounds in 3 weeks, came very close to septic, a life threatening condition. Nobody diagnosed it, nor even tested for it.

The reason, I think, is that Medicare, God bless them, punishes health institutions that report above average C diff infections. Good intentions, all right, but they ignored the incentives this creates. Hospitals now have a strong incentive NOT to diagnose C diff, otherwise they might get punished financially. So they don't test...

Of course, their negligence meant my wife was exposed, especially when we came back home. C diff is now pretty well established in my system, I'm still fighting it as best I can.

(On the surface, the C diff diet is ideal. You can eat whatever you want, from pies to ice cream to cake, as much as you want, and you'll still lose weight fast! I don't recommend it, however. )

Moral of the story: If you or a loved one is hospitalized & given powerful broad spectrum antibiotics, watch very carefully for C diff. The hospital might not like it, but INSIST on testing if you see any symptoms!

Obviously, the real estate appraisal process is on the forefront of news these days....

We just sold a commercial property that was owned by the estate of my deceased parents. For the estate, we had to have an appraisal done of the building, and would then have to pay appropriate estate taxes to PA and the Feds based on the valuation.

While I understand this aspect, it really bothered me.....the actual property is valued higher if there's a tenant occupying the property, and a bit more if there's a long time left on the lease. In our case, the long term tenant is Verizon, so that's about as good as you can get.

Now, it would seem obvious that the property would be valued more with an actual tenant, but it's the same inanimate property whether it's rented or not. As the owners of the property, we are essentially penalized for working hard and smart to get and retain a blue-chip tenant (or a tenant at all). Certainly, the property is income-producing. But say it was appraised when there was no tenant, and the day after the appraisal, we signed a 20 year lease.

The property tax/property tax millage rate does not change whether or not the property is leased.


Coming back to anthropic's property, the allure is world class fishing, and that comes at a substantial cost. I would absolutely add all of that into the cost basis.

Also giving some thought to selling. 80 yoa and had the place about 40 years. About a year ago, arthritis hit me hard. I can’t do the stuff I used to and need to. Having to depend on others and I hate that. Son in law recently changed out the actuators on my front end loader.

133 acres that I paid $43,560 for and now realtors tell me I can get a million bucks for it. Why? There is a mass migration to Texas from California and lots of other places. And, lots of them want their own “ranch”. All trees, rocks, some deer and lots of hogs. Hogs have eliminated my rattle snakes. Shooting range with stations at 25, 50 and 100 yards.

Can only get around on it with a 4 wheeler. Realtor buddy tells me my POS land is what buyers are looking for. Nobody wants a farm.

The tax hickey would be massive.

It’s my get away from town sanity place.

Don’t know that an infusion of cash would improve my way of life.

Once again, I’ve talked myself into keeping it. Not yet; not just yet.

Great post, Dave. Yeah, I feel the same reluctance, though obviously I won't face the same tax burden you do. Arthritis can be tough!

I now have issues with my feet & depth perception. Hauling around heavy sacks of feed just isn't in the cards, and I hate the idea of someone else tasked with doing it. My wonderful wife did it sometimes, as she learned to carry loads from the Hong Kong coolies her family hired to transport their goods up a mountain. But her back is hurting now, so that's out.

My mom thinks I shouldn't sell, as this is my dream place & no amount of money can replace it. She has a point, but unless my visual & balance issues get better, getting in & fishing from a boat is risky. Guess we'll see how much interest there is out there!

PS "Not yet, not just yet." This reminds me of St Augustine's confession: "Lord, make me celibate, but not just yet."

I expect most of the little stuff that you've described, basically anything that wouldn't be considered part of the "real" property,
would be viewed as "personal" property and not included in the value of the land.

Any improvements to the "real" property - outbuildings, roads, ponds, fences, etc. would be considered in the land appraisal.
The double-wide would need to be off the wheels, on a foundation, and declared "real property" at the county office otherwise it's
viewed as personal property.

At least that's how it works here in Misery.

The previous advice to consult a pit bull tax accountant is wise.
If you decide to sell consider retaining a pit bull real estate attorney to guide the process.
Most realtors have zero experience dealing with improved rural properties. Be very careful with your choice if you go that way.

We recently completed the sale of the old family homestead. No realtors, just the buyer and the attorneys. It's a gut-wrenching
experience. You'll want someone on your side who has your interests in mind and whose judgement isn't influenced by
emotional attachment.

Wise advice, Augie. Thanks! Gonna have to get a good tax accountant or attorney who is familiar with improved rural properties. Just as not all bulldozer guys really understand how to build a pond, not all these guys understand my situation.

FYI and not advice. Agree with talking to your accountant and ask about the date of death step-up in value for income taxes. Very few people at this time will owe federal estate taxes (only very rich) as the exemption has been increased. It is important to consider if it is best to sell property or leave by will to your heirs. Critical here is that at this time if you sell the property, you will owe income taxes. If, however you leave the property to your heirs they will get a step up in basis to your date of death value which means they will not owe (generally) income taxes on the sale. Lots of variables like net worth and tax rates etc.

Thanks for the FYI, ewest! Yeah, I have to consider the tax consequences of selling vs leaving it to my heirs. If any of them had strong interest in the place, it would be a lot easier.

Mixed emotions. I’ve gone from 30 to 80 in a heckuva hurry. Hasn’t been long since I was hauling around 2 feed bags; one on each shoulder. If anything hurt, it was because of my life long indiscretions due to poor judgement. Or maybe beer.

Then, about 2 or 3 years ago, I spent 25 days, flat on my back, in ICU due to a busted colon. Got home with no muscle tone and had to take it easy for 8 more LONG weeks. 2 days after I got home I had no memory of being in the hospital. Still don’t. Family told me that it wasn’t something that I would want to remember. When the Doc said that I was healed up, I started exercising, walking and then jogging, and lifting weights. Got it all back. And then arthritis set in. Hit me in the legs and back. I have to be careful and extra strength Tylenols is twice per day. I’m still walking a mile per day (most days).

My memory capability has taken a hit due to the hospitalization. Mostly short term. I have developed big time CRS. I now walk into my shop to do something or get a tool and have no idea why I went there. I ask my wife the same question several times per day. But, friends younger than me say they have the same problem. But, I can still do multiplication and division, to 2 decimal points, in my head.

Lucky to be here. Now, if I could just remember the steps to the rain dance.

Yes, AND you can still comment at Pond Boss.

Keep up the good fight!

Competently.

How about rolling the sale into an IRA?
I did this with 280 acres of farm ground that saved me nearly all of what would be capital gains.
It "may" be different between Farm ground and non commodity gain ground, I can't say.

Do present all options to your accountant. Putting in an IRA may convert the capital gains tax into regular income when the money/property is taken out of the IRA eventually.

No hurry to sell the land. Grandson and his best friend are there deer hunting.

Ya know, I really can’t imagine not owning the place. It’s been 40 years of getting away from Cowtown ( Fort Worth). 133 acres of the biggest piece of POS junk land anywhere. All trees, rocks, hills and draws. Only get around it on 4wheeler trails. As I’ve often said, it doesn’t rain much there. I bought it long before Texas real estate went nuts.

Neat story:

Real estate here has gone out of sight. I only have one rent house left. It was my grandparents house when they moved into town. When they passed, I bought it from the estate to keep it in the family. Rented it out and lived in it for awhile during my suddenly single days.
Then got remarried and wife and I bought our own home and I rented it out again for about 20 or so years. Been paid for a long time.

Grandson got married and they moved into an apartment. After about a year, he and his bride were with us and he told me how much rent they were paying for a one bedroom apartment. I was shocked. That was about 50% more than I was getting for a 3-1-1 brick house on a large lot. When they left, wife and I talked. New young people marriages are stressful enough without $ problems. Bottom line is that the Grandson and his wife are now living in his Great Great Grandparents house for about 40% of what they were paying. They’re essentially paying the taxes and in love with the place. We also like the idea.

I am in this same boat, or will be some day, I hope to enjoy it for another 15 20 yrs but none in the family seem to have the same interest in it that I do but that being said, I sorta plan on it being my cash cow when I cant enjoy it anymore, sort of a retirement account if you will. I have only had it for about 6 yrs and its easily tripled in value with the improvements Ive made, including building stocking and managing a 15 acre lake. also roads and greenfields cleared where there was nothing but solid hardwoods.

Also plan to build a cabin and get electric and water run to it, electric will be a huge cost as the cabin site is at least a quarter mile thru woods to the closest power pole in four different directions. but with the completion of all that would increase the value even more.

I am plus one on an extremely good, knowledgeable, accountant, they are worth every penny and a good one, that is not afraid of their own shadow, will also know how to work some numbers and basically push the envelope. one that will find a way to write something off or use a loop hole versus one that will go ahead and pay extra taxes just to be on the safe side.

A fellow once told me if you are not pushing the envelope you are paying too much. after 30 plus years in business I have only had the business audited once, and the CPA we were using at the time may have actually been pushing the envelope almost a little too hard I was afraid, but in the end of the audit he was also good enough that the IRS was left owing us money in the end. In a nutshell, a good one can be worth every penny, not to mention the fact Id rather pay them extra then I had the irs, He tends to use it way more wisely. At least he probably wont donate it to people who want to see me erased from the face of the earth.
Good Luck!

Jake, I’ve never been audited but keep dang good records. With my CRS, I’m scared not to.

Thanks for the suggestion! I'll look into it with my financial adviser.

It's hard to beat the 1231 option if you can make it fit when selling...everything just rolls forward. I'm on my 4th property and now looking to roll that into my final home where my pond will be. I finally got tired of having to make a road trip out to my property to enjoy it, now I just want to walk out the back door. Lusk figured this out way before I did, but I finally got there!

Pardon my ignorance, but what is the 1231 option?

I think a "Section 1231" property relates to business properties, but allows owners to turn the income from a sale into capital gains (that is taxed at a lower rate).

It sounds like Eastland may have been talking about a Section 1031 "exchange property"? In that case, when you have a large expected capital gain from the sale of your property, you are allowed to reinvest your "profit" into a different property. There are very specific rules to follow when doing this type of exchange, but it is another way to avoid a large capital gains taxable event.

I am certainly not an expert on that topic, but I have some wealthy buddies that have used that option to a substantial benefit.


Eastland, if that is what you meant, and you have better advice than I do, perhaps you could expand on how it worked out for one of your exchanges?

When we built this place in '07 Boone Electric was giving something like 800' of buried electric per installed meter base.
With a meter on the house and one on the barn there was no up-front cost to bringing in the power.
Be worth a phone call to your co-op to find out if they do the same.

Definitely. Check out your options.

When we got our farm, putting a 200 amp service in would have cost money. But a 400 amp service was free. I already had a main switch box rated for 400 amps, so we got a 400 amp service.

Totally agree with Augie about the phone call.

We do not have electricity (or a house) at our property. I enquired with our co-op about their rules. They would give us the first 500' for free if we had X amount of kW-h of usage per year. (Usage rate was average for a small home, not onerous at all.) The rest of the run would be on our nickel at a pretty high price, but copper prices are still outrageous, so I can't blame them.

If you really wanted to get creative, you might enquire about making a hookup to back-feed energy to the grid when your cabin has excess solar (or wind) generation. If you put in $10,000 for solar panels, but saved $10,000 on your grid connection, you would own a valuable asset at a net zero out-of-pocket cost.

Under "normal" conditions, it is hard to get a positive ROI in solar panel installations, but if you got some subsidies on the panels, and some consideration from the co-op on the long hook-up, maybe you come out ahead AND have stand-alone power at your cabin in times of grid disaster!

I was typing while Theo was also typing about creative solutions!

Theo, that is an excellent example of the impeccable logic of government regulated accounting!

Would they have paid you some cash money if you had installed an 800 amp service?

Thanks for cleaning up my mess FishinRod, I was talking abount a 1031 exchange.

Another situation. I started collecting coins over 65 years ago. BTW, I’m now 80. I’ve never bought a coin. But, when the government decided to quit making pure silver dimes, quarters, halves and dollars in 1964, I started saving them. I actually started going to the bank and buying rolls of those coins; mostly dimes and quarters. After awhile, it didn’t make much sense to search or even look at my change. Almost no silver in circulation. At this time silver coins are worth about 16.5 to 17 times face value for the silver content alone.

I have Whitman coin folders about 10 inches tall and a heckuva lot of rolls of silver dimes and quarters. Also some relatively rare coins. Those rolls could, and probably do, have scarce or rare coins that are worth more than silver value.

What to do. Sell them? How do you put a price on them without exhaustive research that I’m not inclined to do?

BTW, We are debt free and all of our day to day needs are met by Social Security.

Sorry to hear about your surgery. When it comes to capital gains tax, generally, the purchase price and significant property improvements count toward the cost basis. Furnishings, satellite TV, and fish feeding costs usually don't.

Thanks, Nina. I guess the key is determining what is a "significant" improvement!

Dave: I'd pass those coins down to kids, grandkids, etc. that seem to have a genuine interest in collecting and won't just chuck them into a vending machine for a candy bar.

If you can afford it, keeping property in the family helps create a legacy and base.

Both of my parents have died. Grew up on family farm. Several siblings. Some of the land was sold. None of siblings now farm. We cash rent it all out. I wish my young son could experience growing up farming; but it is a big gamble. My wife and I make good money; but each of our jobs are also very demanding. Not much spare time to farm or trach prices and concern about the risk. I regret not trying to buy more of the land that was sold; but also need to ensure can make payments.

Ranger, I’ve always believed in real estate. The migration to Texas has put our real estate out of reach.

We bought our home about 30 years ago. I couldn’t afford it now.

When my grandparents died, I bought their house, a 3-1.5-1 brick home from my mom, at market value, a long time back. I wanted to keep it for sentimental reasons. It’s now worth about 4 or more times what I paid for it. My grandson and his wife are living in it and paying about 1/3 what it would cost if they were paying market value, about $1,600 per month, in a one bedroom apartment.

My rural 133 acres of junk land that I bought for $455 per acre would now go for over $10,000 per acre. And, it’s nothing but trees, hills, poison oak and rocks. It has no practical value but people moving from California are looking for what I have. Not for sale. It’s my sanity place.

Guv, I'd keep $330K worth of 'sanity' and sell the remaining 100 acres!!!


Just kidding......maybe.....

Dave, I've only owned my place for nine years, but apparently the value has gone up sharply. Hope a Californian ambles by with too much money burning a hole in their pocket! (Or, thinking of my good neighbors, a Texan.)

If a Californian buys it, remind them that they are a refugee, not an advocate.

When I bought, I could only see a small part of it. There was no road and it was solid oaks and cedars. Got a dozer in and built a road, approx 1 mile, suitable for a pickup, to the back. Now, the road has washed out and it’s really rocky. Can only get to the back by 4 wheeler or tractor. Dozer operators don’t want to put their tracks on rocks so not much way to fix it.

I had the land in front of the house selectively cleared, drilled a well and bought a used, white trash, trailer house. Sewer system was added.

I took my grandfather to see it after I had the road dozed. He was a cotton farmer from North Texas. He said “Well, I’ve finally found it.” I asked what he had found. He said “When the good Lord built the earth, He had one handful of crap that He didn’t know what to do with. Damn boy, you came along and bought it.”. Yep it grows nothing but oaks, rocks, cedars, hogs, deer, rattlesnakes, copperheads and grandkids.

Recently added a 3 station, 100 yard, shooting range with additional stations at 25 and 50 yards.

My kind of place.

Fortunately, the great California exodus comprises mostly sensible middle class & small business owners. The very rich can afford the prices, including gated communities & private security. The poor get big time benefits, so they tend to stay. Day by day, California becomes more third world, with a small wealthy class, not much middle class, and large number of indigents. Refugees are usually solid folks.

Our old friend and member JHAP (late of Sandy Eggo, as he would say) is, I am certain, a worthy addition to Texas.

Ahhh... something I may be of help with!

I'm a CPA

IRS Publication 551 is what you want to look through for what you can use to increase the "basis" of your property. You'd be looking at purchase price plus the items listed in 551 in capital improvements. A capital improvement is an addition or alteration to your property that increases its value, prolongs its useful life, or adapts it to new uses. I know this is pretty gray for a personal property.

I think the biggest barrier is your burden of proof for the capital improvements that you have made. If you do not have evidence of those, you wouldn't stand a chance under audit. I would heavily investigate all of the items you have that were significant improvements to the property and compare that to what you could prove you spent on them. Ultimately if you sell, you'll have to make a risk-based decision on how much you add of those improvements. I think using the fish, fish food would be futile in an audit, but like I said, this all comes back to your risk appetite.

I'd suggest either a 1031 exchange for an income producing rental property (this was mentioned earlier as a way to defer the tax), or do an installment sale. If you sell it via an installment sale, you will only realize capital gains as the proceeds are received each year. Capital gains rates are attractive if you have low income. For instance, if you are married, if you have combined income less than approximately $90,000 your cap gains rate is 0%. All depends on your situation, but an installment sale may be a good approach. A good CPA and good attorney could step you through setting that up well.

tyler,

Could he actually "finance" the sale?

The buyer is probably looking at crappy interest rates on his property loan (if he needs financing). If the seller (anthropic) is willing to take X% interest and finance the sale, would that meet the accounting requirements you have outlined above? (Or would the interest turn part of the cash flow stream back into "income" for tax purposes?)

I have seen moderately wealthy farmers around me offer financing to the buyers when they are selling 5-10 acre lots for rural homes and their target buyers are young couples (that typically do not have a lot of free cash or great credit scores).

[Just thinking out loud since we have yet another thread with a subject matter expert.]

I'm in your debt for sharing your expertise, Tyler. Hopefully you won't charge interest!

Seriously, your post really helps me to think more clearly about the situation. Looks like the property will be listed very soon, so I need to establish a cost that is totally backed up with proof. Someone close to me went through a terrible time when her husband died and the IRS audited her. Unbeknown to her, her husband ventured aggressively into too many gray areas, so the IRS went after her hammer & tongs while she was still grieving. I don't want my wonderful wife to go through an IRS audit and have to defend the cost basis of the property without having all the backup proof. I'm quite mortal, so don't want gray areas that could get my very non-financial oriented wife audited & abused!

Also thinking about this stuff and appreciate the financial expertise/experience.

Bottom line is that I paid $43,560 for the 133 acres, 40 or so years ago, that realtors tell me is worth 8 to 10 k per acre. Somewhere around a million bucks. Improvements are dozer to cut a 1 mile road from the front to the back, a water well, the pond, and a 2 bedroom poor white trash trailer house. Rocky and hilly so is considered recreational property which really means junk land.

Add a shipping container, construction office trailer, one stock pen and tractor shades that I built.

John Deere and 8N Ford tractors, various farm implements, 3 trailer’s, and 2 Honda 4wheelers.

Nothing depreciated and I expect a significant financial hickey.

Since this has been over a 40 year span, I wouldn’t have a clue where the receipts are. Some of them were “lost” in a divorce.

All in my name since I’m on my second (and damn sure last) wife.

I hear you, Dave. My wife is irreplaceable, has stuck with me through thick & thin, and there's been a ton of thin this year. Maybe 2024 will be better, hoping to have a great Alaska fishing trip with folks I love.

Tyler, Here's what I think fit the definition of "an addition or alteration to your property that increases its value, prolongs its useful life, or adapts it to new uses."

Purchase price of property (obviously)
Building dam for main lake
Initial fish stocking (?)
Standpipe, if not included in dam bill
Building small forage pond, including water valve that connects it with main lake
Roads, including road to forage pond & bridge over creek
Gravel roads leading to fish feeders
Rocks for boat launch site (otherwise tend to be too shallow & muddy to launch)
Controlled burn to help timber grow (we have a timber tax exemption so are in the business)
Cement parking space next to home
Artificial structures placed in the lake (?)
Front gate
Irrigation system for front lawn (a necessity in summer!)
Original landscaping, including flagstone walkway to dock (otherwise incredibly muddy trek when it rains)
Replacement of dead flowers & bushes
Riprap on dam to stop erosion, if not already covered in dam building payment
Riprap on drainage ditch to lake, otherwise rapid erosion after every rain
4 bedroom, 3 bath double wide manufactured home (?)
Wooden porch for home
Building home pad with right soils & height so it never floods
Electrical connection to home (?)
Water line to home (?)
Septic tank
Purchase & planting of aquatic plants best suited for bass (?)
Construction of cement spillway to keep excess water & mud from hill away from home
Riprap covering emergency spillway

That's all I can think of right now. One last query: Are these costs indexed for inflation, or will I end up paying capital gains tax on illusory profits?

Yes owner financing is quite popular with farmers. My grandmother just did this with her grandson on a land sale. Land contract was setup, and the way the taxes work is the total gain is realized for tax purposes over the period of the land contract. In that case it was 5 years and we were able to avoid capital gains as her income was low enough.

That being said, a good attorney is needed for a land contract as you want protections for default and other items. But it’s a valid way of stretching the gain over time and reducing the overall tax burden if it helps fall in a lower bracket as capital gains is progressive similar to traditional income tax.

Evidence of cost is the tricky part, thankfully capital gains is a more attractive rate vs regular income tax. (Max is 20%)

What are the plans for the proceeds? Can they be placed in another investment that could produce other tax benefits such as other real estate ?

Is this your primarily residence as well? Or a separate property?

Separate. We go there to relax & do some fishing, mostly 2 or 3 days at a time, but even that has been scarce this year due to a series of health issues.

Okay the reason I asked was to rule out the exclusion of gain for primary residence.

Publication 523 is also another resource that has some more details about improvements that count.

As for adding up your costs. There is a rule noted as the Cohen Rule from tax court cases that allows for reasonable estimates to be used for costs in the case records can’t be found/provided
. In general the IRS would/could be satisfied by a reasonable estimate of the cost at the time period, and there is some sort of general evidence that the improvement exists (ie you can see it) that should help with coming up with your adjusted basis add ons. For instance if earth moving work costs $xxxx now, it would be reasonable to assume it was $xxx years ago. Does it align with inflation, your memory, etc. Making common sense goes a long way here. Any and all materials you can find, drawings, permits, etc. help build a strong case.

Hope this is helpful! Let me know if you have further questions.

Thanks so much, Tyler. Very helpful to hear from an expert! I really don't want my wife to go through what my friend did.

I’d prepare what you have been discussing here in terms of improvements, come up with a reasonable estimate of cost and add it all up. Make sure the improvements are something that can be seen or understood by a 3rd party. For instance you wouldn’t want some improvement added that doesn’t exist anymore. Figure for each $10,000 there is you would be saving $2000 in taxes. I’d speak with a local CPA about your sale and the upcoming tax filings and share your information with them for your adjusted basis. I’d get their opinion on what you have, and how much support/evidence you have as a package and if they feel it’s sound enough for the return. Then you can go back and forth on a few items if they are worth the squeeze or not. Most folks having a hell of a time through audit have done some pretty shady things and or are really unorganized. Keep it organized, reasonable, and with common sense I doubt you’d hear from the IRS. If there isn’t any fraud involved the IRS typically only looks back for 3 years for audits. If you do hear from them, it should be simple explanations. The worst part about audits is the additional cost you incur for representation from a cpa or attorney.

Wow. I haven’t been keeping up with costs over the last 40 years. I’ve ignored the idea that I might need to drag out those expenses someday.

BTW, I don’t live there
I really haven’t spent that much. More of a DIY type who hasn’t kept records/receipts as never considered selling. Now, with arthritis and 80 yoa……

Characteristics:

133 acres that cost about $400 per acre a long time ago. Now, like properties with no improvements are going for $8 to 10k per acre. My phone never stops ringing.

Mobile home that I recently had under pinned. Needs work. Actually more of a $6,000 white trash trailer house that I bought a long time ago.

Dozer work to build a road through the place (1 mile).
Dozer work selective land clearing
2 to 3 acre pond when full. That’s rare
1/4 acre pond when full
Spring fed creek when there’s not a drought.
Bunch of deer blinds and feeders throughout the place


Storage stuff:
Shipping container
Construction office trailer
4 bay Tractor shades that I built

Septic system $$$
Water well $$$
Water piped100 underground yards to house and 50 yards to cattle pen. Did those myself
Well house
Electricity
Rented propane tank
Sewer tank and spray system. That got expensive

Approx 3 acres of coastal Bermuda grass

8 ft tall Cattle pen

John Deere with 4WD and FEL
Ford 8N
2 4wheelers

16 ft trailer and 4x 6 trailer plus a converted pickup bed trailer.
Lots of equipment. Bush hog mower, breaking plows, mower, disc, seeder, box blade and probably more.
Several unusable antique plows and old tractor stuff(junk)

Shooting range with stations at 25, 50 and 100 yards
Concrete ramp leading up into the front gate.
Gravel road 75 yards from gate to house
Deer blinds

This is the first time I’ve ever detailed out the improvements and characteristics. Had the place about 40 years but live in Fort Worth area. The property is 80 miles from home.

If I were selling I would advertise about an acre of blackberries started from bird droppings in 3 different places and some wild plum trees. All the rocks that anyone would ever want

Dave, just about the most insanely expensive coffee beans in the world come from civet droppings in Southeast Asia. Maybe you could advertise your bird dropping blackberries as equally special!

Thanks, that makes good cents -- uh, sense.

I lost an awful lot of my wild blackberry vines during our long, and still occurring, drought. One local guy decided not to sell his place until our long drought ends. Good excuse for me also. A running, spring fed creek beats a dry wash. A couple of half full ponds aren’t worth much. 3 acres of almost dead blackberry patches are thorny, dead sticker vines. 2 other patches look pretty grim.

One detraction for my place is some electrical transmission lines that run for about 1/8 mile across a part of it. I plowed and planted coastal Bermuda over about an acre of it. Then , in the Fall, I disk it and plant winter wheat to feed and murder deer. Didn’t do it this year due to no sub soil moisture from drought. I also have a high tower deer stand there.