Q: I have approximately one acre that is my primary residence. I am considering offering a portion of the land to a next door school for purchase. What would be the best way to determine an offering price?
In addition, could I sell the entire property to the school and then buy back just the residence (and minimal land) and thereby avoid the capital gains tax of just selling the land?
A: It’s difficult to know what the tax treatment will be from the information you provided in your letter.
But, here’s how to get started: Figure out how much the house and land are each worth. Talk to a local real estate agent about land prices in the area and how much people are paying for vacant lots and homes with smaller yards.
Then, go to the school and see if they’d be willing to purchase your land, but sell back the house, or if they’d want the entire property.
You’ll need a good real estate attorney and tax advisor who can structure the deal for you so that you can take some, or all, of your capital gains tax free.
If you handle the sale in the wrong way, you might negate your ability to take advantage of the capital gains tax exclusion.