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Buying or Selling a Home/Federal Taxes on primary residence

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Question
My home is on my farm and I have owned it for more than 25 years. I am selling the farm to a local farmer and putting my home on the market. What are the tax implications of selling my primary residence which is currently part of the farm separately from the farm?

Answer
If I understand how you own your farm and residence, Steve, your home and farm is actually on one parcel. If that be the case, you would need to apply to divide the property so you can indeed sell the house separately. You would need to talk with the local county (or city) planning department and find out what you must do to make that happen.

Once you have successfully divided the properties, you would then determine what percentage of the whole property is the residence. Then you should know if you are subject to taxes or not. I would think you are not. This is why: if you sell your residence for $250,000 if you file your taxes as single person, then no tax is due. If you file your taxes jointly with your wife, then you can sell your residence for $500,000 and no tax is due.

The farm is treated separately and different. It may be treated as a business which gets a different tax rate. I would recommend you consult with a local real estate attorney and/or CPA to see how that would be treated. In any case, you're going to need the real estate attorney to help you divide the two properties as the planning department will want. Your first stop, therefore is to consult with that real estate attorney. I do wish you well.

Dick Dennis
dixiedee13@aol.com

Buying or Selling a Home

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Dick Dennis

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With more than 41 years as a real estate broker, I can solve most any problem presented. If I can`t, I do my research. Problems with mortgages, trust deeds, foreclosures, odd ways of conveying titles. Most any good Realtor can answer questions satisfactorily, but I answer questions that most cannot. Also, ask about my hard-copy newsletter, The Landed Gentry. It can also be sent to you via PDF.

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Solving real estate problems for 37 years.

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National Association of Realtors

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Publishes The Landed Gentry, guest writer in Who's Who in Creative Real Estate, First Tuesday, Financial Freedom and many newspapers

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e-Pro Realtor, Certified Distressed Property Expert, Who's Who in Creative Real Estate

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