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LAND GAINS TAX INFO

LAND GAINS TAX Summary and Purpose of the Tax: The purpose of the tax is to regulate short term speculation in land sales and exchanges in the state through supplemental taxation of the profits derived.  The law also seeks to encourage primary home ownership.  The land gains tax is supplemental to any federal, state, or local income tad which may be due with respect to the sale or exchange. In general, anyone who sells or exchanges land in the state that was held by such seller for less than six years is required to file a Land Gains Tax Return (Form LG-2) with the Vermont Department of Taxes within 30 days of the sale, even if no tax is due.  Anyone who buys land in this state from a seller who has not held the land for six years is required to file a Land Gains Withholding Tax Return (Form LG-1) with the Vermont Department of Taxes. Elements of the Tax: The elements of the land gains tax are:
  • Progressive tax on sellers profits
  • Attributable to sale (or exchange)
  • Of land
  • Held by seller less than 6 years
First, the land gains tax is assessed in percentage terms of the basis of the amount of gain and the number of years held according to the chart below copied from the current (12/92) instruction sheet provided by the Vermont Department of Taxes below: Years Land Held by                      Gain, as a Percentage of basis Transferor (Line 8©)                                    (Line 16) 0-99%     100-199%       200% or more Less than 4 months                                           60%          70%                 80% 4 months, but less than 8                                   35%          52.5%              70% 8 months, but less than 1 year                           30%          45%                 60% 1 year, but less than 2                                       25%          37.5%              50% 2 years, but less than 3                          20%          30%                 40% 3 years, but less than 4                          15%          22.5%              30% 4 years, but less than 5                          10%          15%                 20% 5 years, but less than 6                          5%           7.5%                10%

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