In misc.taxes.moderated, wolfman wrote:

- quote -

You say that you came to own this land because of your inspiration
and efforts. That sounds like earned income to me, in my non-expert
opinion.

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- quote -

there wasn't a written agreement in 1994 but there was in
1995 after we settled the lawsuit. The original verbal
agreement was for us to share the profits 50/50 and the
settlement agreement signed in 1995 stated this also.

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"Stuart Bronstein" <spamtrap[at]lexregia.com> wrote
- quote -

Partnerships are quirky things. A partner need not have the
same percentage interest in the assets as they do in the
profits.

- quote -

Tis true. The partnership agreement should have clearly
spelled out the situation and what will happen.

Maybe this was one of those "loose" partnerships.

- quote -

It sounds like he didn't.

- quote -

Not so. The partnership default is by percentage ownership,
but the written agreement should have clearly stated that
this partner received half the gains and profits upon the
sale.

Me thinks there wasn't any written agreement here.

--
Paul A. Thomas, CPA
Athens, Georgia

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rdad...[at]panix.com (Dick Adams) wrote:
- quote -

Montana. I do not know whoever told him but the deal is that
a verbal agreement is only valid for 1 year if it is not
acted upon by either party. In this case he acted upon it by
putting up the money to buy the land. I acted upon it by
divulging the location of the land, showing timber buyers
the trees and trying to negotiate timber sales. > > > It was
obvious that he was going to lose so he settled with > > me.
In that settlement agreement it was stipulated that the > timber would be sold as soon as possible and then the land
- quote -


- quote -

Actually more than this since the $340,000 was only for the
trees and I was entitled to half of the sale price of the
land also. After the logging took place the land is more
valuable because roads are built through the property by the
logging company where no access was available before.

- quote -

Yes i am ahead of the game but not as much as i should have
been. Also this has taken 12 years to get settled.

- quote -

My father has disowned him. He rarely speaks to him even
though he is dying. Every time my mother speaks to him she
tells him to be a man and live up to his agreement.

- quote -

Ok. thank you for the advice. I will go ahead with the sale
of the land and claim long term capital gains. Revising
prior years may be more trouble than it is worth. I do not
want to open more of a can of worms with the IRS than I
already am unless that would strengthen my claim of long
term capital gains. Also this has been going on for 12 years
so i don't think you can go back that far can you ??

- quote -

I am sure he would cheat any one including the IRS.

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- quote -

The joint venture papers were filed when we started having
problems. That would have been 11 years ago though so should
qualify as long term. Thanks for your opinion. I have no
problem using zero as a basis and paying on the entire
amount.

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Stuart Bronstein <spamtrap[at]lexregia.com> wrote:
- quote -

It's protection against OP's debts causing the property to
be seized.

- quote -

He was _not_ entitled to half the proceeds. He was entitled
to half the _profit_.

The correct structure would, I think, have been to set up a
partnership, which then _borrowed_ money from his brother to
buy the property. He'd own half of an indebted partnership.

- quote -

I'd suggest not paying much, because the owner might
immediately sell the property for no or very little profit.

Seth

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Dick Adams <rdadams[at]panix.com> wrote:
- quote -

Which he apparently did, to the satisfaction of the
arbitrator and courts.

- quote -

That's a separate issue. In Real Estate, oral agreements
are generally not binding at all; other agreements can be
provided it's _possible_ for them to be satisfied fast
enough (typically 1 or 2 years).

Seth

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wolfman <laedeketrading[at]gmail.com> wrote:

- quote -

It seems to me that the consensus is that you need to show that
you were a no-equity partner in this all along.

- quote -

So at that point, you each stood to make $130,000.

- quote -

In what State? Maybe he should sue whoever told him.

- quote -

So now it's at $150,000 and he reneged on a signed
agreement this time.

- quote -

So you are up $120,000 less legal fees and selling expenses. Since
you only expected $50,000, you're ahead of the game plus you know
better than to deal with < expletives deleted > again - who by the
way is up $260,000 less legal fees and selling expenses.

Your brother is fortunate he is not my brother. My father would, at
a minimum, would have disowned him - and he has done that.

- quote -

As far as I can tell, you got this land as part of an unwritten
partnership agreement so it's a capital gain. You may need
to revise prior years 1040's to deduct the legal fees as a
business expense..

BTW, I wonder if he declared the $100,000+ from the timber
sales on his tax return. If he did, maybe he deducted the
$40,000 land cost from it? If you'd cheat your own family,
why not the IRS?

Dick

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Seth wrote:
- quote -

If it's a partnership, getting half interest in the profit
means half interest in the partnership. Otherwise he'd
simply be a hired hand.

- quote -

It's not much protection if it turns into a lawsuit. They
should have had a partnership agreement explaining all that.
Otherwise that kind of "protection" can be meaningless.

- quote -

Again, legally he had no interest in the property per se.
But if it were a partnership and he was entitled to half the
proceeds from the beginning, he was immediately half owner
of the partnership.

- quote -

It's what a willing buyer would pay, of course. How much
would you pay for that? It's certainly worth more than
nothing if you can just sit and wait for the property to
increase in value, with no downside.

Stu

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some of you seem to understand but some of you do not so I
will explain further.

I found this land that had timber on it. It was cheap
because it was land locked. I also found someone that wanted
to sell their land which would then grant access. The plan
was to buy both pieces of land and then sell the timber to
pay my brother back for the purchase of the land. After the
timber was logged then we were to sell the land and split
the profit. To make it clear my brother did not know about
this land until I told him about it. He was supposed to put
up the money and I was supposed to handle all of the
negotiations with the loggers, lumber mills and the sale of
the land. Our expected profit was only going to be around
$100,000. While I was doing this we found someone that
offered us $300,000 for the land. We only paid $40,000 for
the land. This is when my brother got greedy. He had heard
that a verbal agreement was only binding for one year so he
started using delaying tactics to keep from making any sales
until after the year was up. Then he told me that I was out
of the deal. I filed a notice of joint venture at the clerk
and recorders office where the land deed was filed. He then
filed a lawsuit against me. The judge ordered an
arbitration. The arbitrator ruled in my favor. He refused to
accept this. His lawyer then filed a bunch of motions and he
was ruled against on every single one. It was obvious that
he was going to lose so he settled with me. In that
settlement agreement it was stipulated that the timber would
be sold as soon as possible and then the land sold. I found
a buyer that was willing to pay $340,000 only for the
timber. He refused to sign. Then the timber market dropped.
He ended up hiring a logger to cut the trees so I filed a
lawsuit against him. The logger told me that my brother
received over $100,000 from the timber sales. My father is
dying of cancer and he asked that this fight be settled
before he dies. To honor his wishes I agreed to settle for
80 acres to be transfered into my name. I now have a person
that wants to buy it for $120,000.

I have no problems paying long term capital gains on the
entire $120,000 but I do not want to pay personal taxes on
this money. If it comes to that I will wait to sell.

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"wolfman" <laedeketrading[at]gmail.com> wrote:

- quote -


Hopefully, the jt venture papers were filed indicating the
date that you & your brother purchased the property. Looks
like you should be able to to report the sale as a (long
term) capital gain. But, from your message your basis
appears to be zero. You should consult your own CPA/tax
advisor.

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] > > -----> real address on hobokeni or hobokenx <-----

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Stuart Bronstein <spamtrap[at]lexregia.com> wrote:
- quote -

He didn't get a half interest in the property. He got a
half interest in the profit.

- quote -

It protects the person who put up the money, since he owns
the property.

- quote -

To protect the person who put up the money.

- quote -

He wasn't a half owner of the property. Initially, he had a
0% interest. As the price increased, his equity did as
well.

- quote -

No, a half interest in the potential *profit*.

- quote -

What is the taxable value of a half interest in the excess
sale price over $100,000 for property whose current market
value is $100,000?

Seth

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wolfman wrote:

- quote -

Ok so far. But please explain a little more why you were
getting half interest if you were not investing any money.

- quote -

I'm also confused about this. Why in the world would you do
that? How does that protect the investment?

- quote -

Conceptually you can claim long term capital gain treatment
because you were an equitable (if not a legal) owner for the
entire time.

There are several potential problems, however, and that's
the reason I asked the questions above. Answers to those
will need to be determined before your ownership can be
justified.

First of all, the reason the property was put only in your
brother's name will have to be reviewed. You will have to
justify that it was a legally reasonable thing to do if you
were actually a half owner.

Also you appear to have received a half interest in property
but gave nothing in exchange except for your services. If
that's true you should have recognized taxable income at the
time in the value of the property you received. If you
didn't, that could be a problem.

Stu

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wolfman wrote:

- quote -

Sounds fair to me.

- quote -

WOW! I knew what the next paragraph would be before I read
it.

- quote -

Make certain the settlement stipulates that you were to
unnamed partner.

Dick

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I went into a joint venture with my brother on a land
purchase about 15 years ago. We bought 200 acres for resale.
It was cheap because it did not have access. The plan was to
buy the access to the land and then buy the land which we
did. Since it was my idea and i knew where the land was my
brother agreed to put up all of the money and we would split
the profit 50/50. To protect his investment we agreed to put
the land in his name only. After we found a buyer he got
greedy and decided to try and keep it all himself. It ended
up in court and we are just now settling our dispute. In the
settlement 80 acres are to be transfered to me. Now I have
someone that wants to buy my 80 acres.

Can I claim capital gains on the sale of this land since i
had a joint venture interest in it for the last 15 years?
The joint venture interest has been filed at the clerk and
recorders office all this time.

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