| Tax Implication for sale of adjacent lot on Principal Residence?
The IRS has stated that the "capital gains on selling a lot adjacent to your main home can be excluded."
But, the IRS has issued some exceptions to this rule in that it is not applicable if a family partnership owns the lot. There are also some qualification requirements in order for the taxpayer to be able to qualify for the exclusion on the capital gain on the sale of the lot. These are as follows;
1. the property lot (land) must be adjacent to the lot that contains the primary home.
2. the property lot (land) must be used as part of the home.
3. the land must be sold within two years before or after the home is sold. The $250,000/$500,000 exclusion rule applies to gain on the combined sales.
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