Legal Question in Real Estate Law in Virginia

My wife and I own a home with an estimated value of about $550,000 and vacant lot with a value of about $175,000. The home has a mortgage of $247,000 and we own the vacant lot free and clear. So, we have a net worth in real estate of about $478,000. Can I sell the vacant lot and buy another vacant lot and then sell our home and build a new home on the new vacant lot without having to pay taxes on the capital gains on the two properties. We originally purchased the vacant lot for $85,000 and the home for $260,000. Basically we want to take the two properties and build one new house in which we would live.

Thanks,

Mark


Asked on 3/23/11, 9:11 am

1 Answer from Attorneys
Michael Hendrickson Law Office Michael E. Hendrickson

You may be able to exclude capital gains on the vacant lot if you can demonstrate that it was used as part of your residence and the sale of this land occurred within two years before or after the sale of your principal residence.

Assuming you've occupied your principal residence for the required time within

the last five years preceding its sale, you and your wife should be able to exclude at least $500K from capital gains taxes from the sale of this property.

You would, of course, be well advised to confirm all of the above

with an attorney who specializes in federal and state tax matters.

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Answered on 3/23/11, 9:33 am


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