I recently purchased a second property, 1.3 acres with a mobile home. It is listed as 5 lots with the appraisal district. How would I calculate taxes if I was to sell 2 of the raw lots totaling .5 acres? Obviously it would be less than what I payed for the entire place so how would I determine capital gains?

I think the answer for federal income tax is that you would use a "reasonable method". Prorating your cost basis by acreage is what is probably the most common method. Each lot may not have the same attributes though. In that case you need to do your own proration but be able to justify it if ever audited.

i would apportion based on FMV.

if its 5 lots with the appraisal district, why don't you just use the appraisal value of each lot over the total multiplied by the purchase price?

in a perfect world you would get a real appraisal to get actual FMV and not a fictional value from the CAD, but im sure the CAD allocation would be close enough. and you're out the cost of an appraisal too under this approach.

1.167(a)-5 governs apportionment of basis in a depreciable property scenario and for business purposes. but this is close enough.


1.167(a)-5 Apportionment of basis.
In the case of the acquisition on or after March 1, 1913, of a combination of depreciable and nondepreciable property for a lump sum, as for example, buildings and land, the basis for depreciation cannot exceed an amount which bears the same proportion to the lump sum as the value of the depreciable property at the time of acquisition bears to the value of the entire property at that time.

This sounds like one of them math word problems they made you do in middle school. As usual, there is no right answer, they're just trying to trick you to see if you were paying attention.