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December 2, 2019 By Dr. Ken Rich

Get Cash for Unsaleable Land

Get Cash for Unsaleable Land

First let’s define Unsaleable Land. There are lots of reasons for unsaleable land but they boil down to the following categories:

  1. Land Locked – you can’t get to it to use it for any productive reason. It may be remote. It may be restricted by CC&Rs or Building Codes. In fact, sometimes government or political groups make it impossible to use it.
  2. Undevelopable – The ground is not stable. Utilities can not be brought to it. Building materials can’t be brought in.
  3. Social development has taken a different route. The interstate went through a different valley.

I lived in a rural area and saw all of these in action. Property two miles up a creek that was designated as a road but only accessible by 4 wheel trucks driving between the banks of the creek. For $590 a man bought .347 yards of land at a county land auction that was what remained after the interstate was built. It was literally 1/3 of a square yard that the state didn’t want since it complicated their smooth property line at the end of an off ramp. Several politicians and local big wigs got burned after grabbing land where the new interstate was to go only to find it went through a different valley.

How do you cash out of unsaleable land? By donating it. The IRS says any real estate can be valued at $5,000 or what was originally paid for it (whichever is less) when it’s donated without any appraisal. Their policy is to accept that evaluation without question. A higher amount requires a licensed appraisal.

But wait! The Land is worthless!! The IRS doesn’t care. After all, they are a business and the law states what they do.

Their first step is to decide if it meets their minimal limit of $1,000 in unpaid taxes. If you’re in a 22% tax bracket the $5,000 deduction got you $1,100 tax reduction – YES, Failure to pay proper estimated tax. Next they decide what the penalty is. It’s based on Multiply line 14 by 0.03603. $1,100 x 0.03603 = $39.63. Now honestly, do you think the IRS will actively hunt down such a pittance when there are much bigger fish to fry?

If you found this informative, please share it with others.

By Dr. Ken Rich Filed Under: Donations, Real Estate Tagged With: donation, process, real estate

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