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Section 22: Information for Income Tax Purposes for Property Owners (for State)

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During negotiations if questions are asked in regard to income tax, the property owner should be advised to contact the Internal Revenue Service Office that serves the local area or to seek legal counsel. It may be advised, however, of the Internal Revenue Service ruling that for any part of the compensation paid by TxDOT to be treated as damages by the taxpayer in its income tax return, the amount paid for such damages must be agreed to both by TxDOT and the property owner. TxDOT will not, under any circumstances, agree to a damage figure that does not agree with the approved value. Agreement as to the amount of damages paid may be included in the Memorandum of Agreement, or it may be documented by separate agreement after the closing transaction. The suggested wording to be used in the Memorandum of Agreement is as follows:

“It is agreed by and between the parties hereto that the compensation herein provided for includes the sum of XXXXXXX dollars for damages to grantor's remaining property.”

If retention of improvements is involved, the preceding clause may be used, or the following alternative clause is acceptable, whichever is preferred by the property owner.

“It is agreed by and between the parties hereto that of the total compensation of $XXXXX as herein provided, $XXXXX is payment for the property conveyed to the State with the remaining $XXXXX representing payment for damages the remaining property suffers by reason of the taking and the necessity of property adjustments to accomplish the taking.”

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