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DEAD LAND WALKING

August 14, 2006

We've talked about how a whiff of a threat of condemnation can enable a holder of appreciated real estate to punt taxes on the sale of the real estate into the misty future. A California Congresscritter has a remarkable nose for this sort of thing: he apparently can smell a threat of condemnation where nobody else can (hat tip: Stuart Levine).

The tax break for condemned property allows taxpayers to avoid tax on a sale made "under threat or imminence" of condemnation, if the taxpayer reinvests in similar property within two years. The L.A. Times reports that he claimed the benefits of this provision, Section 1033, even though nobody was threatening to condemn his property. As the gain is $10 million, there's real money at stake.

If his returns are to be believed, he is as unlucky at being selected to have his land condemned as he is lucky at real estate investing; he claimed two additional Section 1033 breaks on subsequent deals.

Unfortunately for the Congressman, he can't seem find any government agency that wanted to condemn the property; the only agency interested in his property at the moment seems to be the IRS, and he probably would rather they weren't.

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