Pond Boss Forums INTRO Questions & Observations When it comes time to sell...

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?