Two Lots (One with a House and One Vacant)
Question:
The client severed a back lot from her house. The first lot is now smaller and has the house on it. The back lot is a buildable lot and is vacant.
Which would you sell first? Would you sell both together? Would you sell them separately?
Answer:
If you sell them both together the principal residence exemption is likely to apply to both. Separately, one is exempt and the other is taxable. You should undertake a computation so you will know the implications. It’s possible that the back lot will no longer qualify. You should know that too. It depends in part how the client treated the expenses related to the creation of the lot.
The empty lot alone is hard to finance and therefore harder to sell. That’s one reason to sell together independent of the taxation implications.
Brian Madigan LL.B., Broker