Eminent Domain

By: Martin M. Shenkman, CPA, MBA, JD

A government has the power and authority to take private property (e.g., part of your backyard) for a public purpose of the state (e.g., expanding a state road). A range of issues arise when a government body exercises this authority. Will you be compensated and on what basis. What if there is a partial taking? For example high power lines are run across your property. While you still own and can use the property, practically speaking you may not be able to. How broadly can the government define public purpose? Can the government take your property for use in completing a private development? If you receive compensation for a taking of your property the tax laws have special provisions to enable you to reinvest the proceeds and avoid income taxation of them.

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