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Selling the Farm » From: Wirtz, VA Dear TaxMama: My 87 yr. old mother is selling her property. It's a 134 yr.old. farm house and barn on 5 acres located in Bucks Co. PA. I am concerned about her tax liability. The property was purchased in 1951 for $25,000. The asking price is $489,000. She converted the house into 2 apartments which she rents, and the barn into 1 apt. which she lives in. Will she be able to claim the $250,000 deduction to lessen her capital gains liability? Thanking you in advance. Virginia Dear Virginia, She will be able use that personal exclusion on the part of the property that qualifies as her personal residence. This is where it's well worth the money to get the help of an experienced tax professional and experienced appraiser, who can split the property up to maximize the value of the personal part of the property and minimize the value of the rental part of the property. Otherwise, she'll be paying tax on a large part of the profit. Pity she couldn't hold on to the property as long as she lives. If she were to that, there would be NO gain at all on the sale. And if she needs cash during her lifetime, she could draw it by borrowing against the property. In fact, her family could lend her the money and secure their loan against the property - and you'd all get it back, plus interest, after her death. Just a thought. Best wishes, Eva Rosenberg Your TaxMama

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