Expert: Dick Dennis - 7/13/2007

Question
I bought a 6.72 acre parcel of land adjoing my 1 acre parcel with my home on it with the idea of building another larger house on it in 2004.  Caring for one of acre of land is more than I can manage so if I do build another house I'll probably try to purchase a half-acre lot for that purpose.  My 6.72 acres are paid for and I have a current agricultural exemption so the taxes are only $18.00 a year.  It's deed restricted to one home so I couldn't sub-divide the land.  A family down the road would like to purchase the land to build a home on it.  My question are should I sell and how do I sell?  I don't need a realtor to find a buyer, but I don't know how to appraise the land or handle the transaction.  As everyone else, I would like to keep the commission fees in my pocket.  Also, how would I be taxed on the income from the sale?  Do I need to but another piece of property right away to avoid capital gains taxes?  Thanks for any help you can give me.

Answer
If you have an agriculture exemption on the property, Roslyn, then you better check with the county tax collector to make sure you are not going to be hit with a large tax upon selling the property. When you have an exemption such as that, you are restricted from selling the property for a number of years, each state has their own rules on that. If there is none, then you may proceed. Then if you sell the property, if you do not use the 1031 IRC rule, then you are going to be hit with a tax for capital gain. You had better sit down with a REAL ESTATE attorney to make sure you are stepping into a tax trap. NOW do you see why a good real estate person is worth his/her money? You need an attorney at least. I do wish you well.

Dick Dennis