Land Gains Basic Calculation Foreclosure Property - Vermont Department Of Taxes (Page 2 of 2) in pdf

Land Gains Basic Calculation Foreclosure Property - Vermont Department Of Taxes Page 2

VERMONT DEPARTMENT OF TAXES

TECHNICAL BULLETIN

TAX:

LAND GAINS TAX

TB – 1

SUBJECT:

BASIS OF LAND ACQUIRED THROUGH

ISSUED 7/21/95

FORECLOSURE OR TRANSFER IN LIEU

OF FORECLOSURE

_____________________________________________________________________________________

32 V.S.A. § 10005(a) provides that “[t]he provisions of the Federal Internal Revenue Code shall

determine the basis of land sold or exchanged except basis for land transferred by a mortgagee who

acquired the land by the foreclosure or transfer in lieu of foreclosure shall be the amount of debt due the

mortgagee, increased by the costs of acquisition, and decreased by the amount of any tax benefit due to

bad debt loss on the mortgage debt.

The following guidelines apply when determining the basis of land transferred by a mortgagee or

judgment lien creditor who acquired the land by foreclosure or transfer in lieu of foreclosure.

1. The “amount of debt due” does not include interest if the interest has not been reported as income for

state and federal income tax purposes or the income has been reversed out by any accounting adjustments.

2. “Tax benefit” means the bad debt write-off multiplied by the federal and state marginal rates applicable

to the mortgagee or judgment lien creditor.

3. In cases of “foreclosure by sale” under Vermont Rule of Civil Procedure 80.1 by mortgagees or

judgment lien creditors, payments to other lien holders and debtors by the mortgagee or judgment lien

creditor, which are required under this rule, as considered to be part of the basis.

For more information on basis determination you may call the land gains tax division at 802-828-6681 or

write to Vermont Department of Taxes, Land Gains Tax, 133 State Street, Montpelier, VT 05633-1401.

The purpose of this bulletin is to supply general information to the public on the subject of basis

determination for land gains tax purposes and does not replace the need for competent legal advice. This

technical bulletin supersedes all prior department pronouncements on this subject.

Frank Chapman

Assistant Director of Income Tax

Approved:

Betsy Anderson

Commissioner of Taxes

Land Gains Basic Calculation Foreclosure Property - Vermont Department Of Taxes Page 2