Rebecca is a single taxpayer. In 2007 Rebecca’s grandmother gifted her a house and 10 acres in a rural area outside of Whitewater.

Rebecca is a single taxpayer. In 2007 Rebecca’s grandmother gifted her a house and 10 acres in a rural area outside of Whitewater. After living in the house for four years and working as a marketing agent for a publisher she tired of the travel, quit her job, built a building and started a small country store/bakery on the property. The store became fairly successful and was able to support her and provide for savings. She has been filing the store income on form 1040, Schedule C. Now she is contemplating selling the store, house, and property and moving on to something new.

Grandma inherited the house and property from her father in 1976. The 1976 property tax bill show the total FMV of the property at $20,000 with value of improvements at $15,000 and value of land at $5,000.  The 2007 property tax bill for the property reports the total FMV at $500,000 with land valued at $200,000 and improvements at $300,000. The depreciable basis of the store is $200,000 (accumulated depreciation of $31,000) and the store equipment (personal property) FMV of $50,000 (accumulated depreciation of $22,000). When you look at the property it appears the business takes up about 2 to 3 acres. Rebecca thinks she can get $1,200,000 for the house, land, and business.  If the deal goes through it will likely close around the end of 2017 or the first month or two of 2018. Rebecca’s income from the store for 2017 will be about $90,000. In general taxable income from the store has grown at about 4% per year. Rebecca took a safe harbor home office deduction a couple of times in the past. The total depreciation included in this deduction was $3,000.

Rebecca is not in any great need of cash and she does not like the idea of paying taxes. She has expressed an interest in starting a bed and breakfast with the money she will get from the sale. Rebecca is a smart business woman and is very good with day to day operations of the business and numbers in general but she has no experience with this type of transaction. She would like to know the best way to structure this sale to meet her goals and what she might expect to send to “Uncle Sam and the Governor”

I want to know the taxable income after Rebecca sold her land/house, business gain.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *