Tax Consequences of Eminent Domain Proceeds
In the question to the Fox Business Editor, the response to an owner who was probably being improperly taxed is correct. As one reads the Fox Business response, the property owner simply should not have proceeded without the direct participation of a CPA or competent tax attorney in discussing issues with the IRS. Clearly, the IRS agent was overreaching in this situation. Hopefully the situation will be rectified before the property owner acquired by eminent domain loses his reinvestment rights and fair tax treatment.
Several years ago, my strip mall was "sold" to the county under the process of eminent domain for the purpose of widening a state road. When undergoing this process, I hired a lawyer who strictly deals with eminent domain proceedings. My CPA prepared the corporate tax return based on the sales contract, etc., for the strip mall, and now the Internal Revenue Service is questioning how it was reported.
The IRS claims that personal property such as a hood, chairs and tables that remained in the restaurant as well as outside signage, etc., is subject to sales proceeds, which need to be taxed. The IRS argues that this transaction is treated as a "sale of business." Furthermore, they argue that since the IRS does not have a copy of the appraisal at hand, the assumption is that a certain dollar amount was allocated toward personal property.
