Hello everyone!

Not sure how to properly handle the following situation that results in a substantial gain:

> Received a 1099-S for $120k of proceeds from an eminent domain seizure.
> The seizure was for 0.25 acres of property that was a part of the front yard of the main home. Full property is 3 acres + home.
> Paid $30k in legal fees related to getting the reward.
> The adjusted cost basis in the 0.25 acres is $10k.
> Have lived in the home for 12 years
> There will be significant work to restore the property to its original state after the county finishes their work. Estimate is at least $50k but could be more.

This results in a 2016 net long term capital gain of $80k ($120 - $30 - $10)

With all this in mind does the sale of your principal residence exclusion apply to this case since the home is still intact and will continue to be the main residence? If it does can you point me to the proper tax code or IRS bulletin/publication? I can't seem to find much on a partial condemnation!

If the exclusion doesn't apply I guess I will have to go the postponement of gain route to buy time to rehab the property.

Thank you!