Fillable Form Lg-2 - Vermont Land Gains Tax Return (Page 3 of 5) in pdf

VERMONT LAND GAINS TAX RETURN (Form LG-2)

INSTRUCTIONS FOR SELLER (TRANSFEROR)

6a Purchaser’s Principal Residence Exemption - This

GENERAL INFORMATION

exemption applies to the sale of a dwelling and up to ten acres of

WHO IS REQUIRED TO FILE A VERMONT LAND GAINS TAX

land which the buyer will occupy as a principal residence within

RETURN? The land gains tax is a tax on the gain from the sale or

one year of purchase, or if no dwelling exists, sale of land on which

exchange of Vermont land that was held for less than six years.

the buyer will construct and occupy a principal residence within

The definition of land may include the sale of timber or timber

two years from purchase. If a local zoning ordinance requires

rights. Anyone who sells Vermont land that was held by the seller

more than ten acres for residential property, then the acreage

for less than six years is required to file this return within 30 days

specified in the ordinance will be exempted, up to a maximum of

after the sale, even if no tax is due. If the buyer claims the

25 acres. A “principal residence” includes a multi-family dwelling

builder’s exemption, the agricultural exemption, the

of four units or less if at least one unit will be used as the buyer’s

affordable housing exemption, or the purchaser’s principal

principal residence.

A dwelling may qualify as a principal

residence exemption, the seller must file this return within 30

residence even though the resident maintains an office or retail

days of the sale to establish the amount of the buyer’s liability

store in the dwelling. In order for an existing dwelling to qualify as

in the event the conditions for exemptions are not met.

a purchaser’s principal residence, the purchaser must occupy the

dwelling as his principal residence within one year of the date of

Timber/Timber Rights.

When the underlying land is sold

purchase.

separately from timber or timber rights and both sales occur within

6 years of the purchase, the gain on the sale of the timber or timber

6b Builder’s Exemption - This exemption applies to the sale

rights shall be combined with the gain or loss on the sale of the

of up to ten acres of land on which the buyer (a builder) will build

land to determine the land gains tax liability. If the sale of the land

a dwelling that will be the principal residence of the next

occurs first, and land gains tax on the sale has become due, before

purchaser. If local zoning requires more than ten acres for

the timber or timber rights are sold, the taxpayer shall recompute

residential property, the acreage specified in the ordinance will be

and file an amended Land Gains Tax Return to include the gain or

exempted, up to a maximum of 25 acres. The builder must begin

loss from the sale of timber and timber rights sold within 6 years of

construction of a dwelling within one year, complete construction

purchase. This rule shall apply if the underlying land is or was part

within two years, and sell the dwelling within three years to a buyer

of more than 300 acres of contiguous land owned by the same

who will occupy it as his or her principal residence. (If the land is

taxpayer. If the land is subject to and in compliance with a forest

sold as more than one parcel by the builder who acquired it, each

management plan approved under 32 V.S.A. §3755(b) or

parcel must meet these three conditions.) In addition to claiming

10 V.S.A. §2623(2), neither timber nor timber rights are taxable.

the exemption on the Land Gains Withholding Tax Return, the

builder must file three Certificates of Principal Residence

Exceptions to Filing Requirement - The seller is not required to

Construction (Forms LG 1.3, 1.4, and 1.5). The person buying

file this return if the buyer or seller claims one of the exemptions on

from the builder must indicate on the Property Transfer Tax Return

the Property Transfer Tax Return. See the instructions for Line U

that the property will be used as the buyer’s principal residence.

on page 5.

6c Agricultural Exemption - If this exemption is claimed,

identify which type by checking Box 1 or Box 2.

LINE-BY-LINE INSTRUCTIONS

Box 1. Sale of agricultural land by a farmer to the farmer’s

Lines 1 and 2 - Enter the full name, mailing address and social

grandparent, parent, stepparent, brother, sister or child. The

security or federal identification number of each transferor and

buyer must use the land as agricultural land for a period of time

transferee.

which, when added to the time the land was used as agricultural

land by the transferor, equals or exceeds six years. To qualify as

Line 3 - Check which describes the property interest being sold. A

a farmer, an individual must earn at least one-half of his or her

lease is subject to tax if it is for a period of at least 50 years

gross income from the business of farming. Agricultural land must

(including possible renewals) or if the lessee has a purchase

contain at least 25 acres or produce an annual gross income of

option and the right to construct a building or structure or make

$2,000 from the sale of farm crops in one of the two, or three of the

major capital improvements.

five, preceding calendar years.

Line 4a - Enter the street address and town. If the property is

Box 2. Sale of 25 acres or less to a farmer (32 V.S.A. §3752) for

located in more than one town, list all towns.

active and direct use by that farmer, and which, upon transfer, but

for the acreage, meets the definition of agricultural/forest land in

Line 4b - Enter the acreage or number of square feet being sold.

§3752 and continues to meet that definition for at least six years

Line 5 - Check the boxes that describe the property.

after the transfer.

Line 6 - Check the appropriate box if an exemption is claimed. The

6d Seller’s Principal Residence Exemption - Sale of up to

seller may not claim the purchaser’s principal residence

ten acres of land (or up to 25 acres if required by a local zoning

exemption, the builder’s exemption, or the agricultural exemption

ordinance) that was occupied by the seller as his or her principal

unless the buyer has claimed the exemption on a Land Gains

residence. If the entire parcel is exempt from tax, the seller is not

Withholding Tax Return filed with the Department of Taxes. If you

required to file this return. The seller may claim the exemption on

check “other,” please explain.

the Property Transfer Tax Return. If more than ten acres of land

Form Lg-2 - Vermont Land Gains Tax Return Page 3

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