Legal Question in Tax Law in Massachusetts
Capital
We sold our home, on 2.2 acres of land, because we were divorcing.
Two buyers were interested. One buyer wanted the house and a small piece of property, which is all he could afford, and the other buyer wanted land. They convinced us to subdivide, which we did to meet our asking price.
We sold the house in January, 2001, for $260,000 and the land in March of 2001, because it took that long to subdivide. The land was sold for $80,000.
Our accountant said we had to pay taxes on the land because it was considered a second sale that year. We paid over $8000.00 in tax. We never would have subdivided had we known that.
I have just learned that in December, 2002, Section 121 was revised. If I am reading it correctly, as long as a piece of property was once a part of the residence, and was sold within two years of the residence, it is considered one sale.
If this is true, the entire sale was less than the $500,000 allowed by the IRS as an exemption and my ex and I should be able to amend our taxes.
Any help is appreciated. Thank you in advance.
1 Answer from Attorneys
Re: Capital
As a first step, ask your accountant, who could most easily file an amended return if the law changed your tax situation for the prior return. This is really not the kind of question that it would be worth hiring a tax lawyer to handle.
BTW, if you disagree with your accountant, get a second opinion; always be sure to use a Certified Public Accountant (not just a guy who calls himself an "accountant" or "tax preparer").
Best wishes,
LDWG
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