Long Term Capital Gains-structure Vs. Land
I got to thinking about something to do with building on land you have owned for a while.
If I bought a lot in July of 04.....
and I complete SFR construction on that same lot in Oct. of 05......
Then sell the lot with the house in Oct. 05......
Do I pay short term capital gains on the entire sale amount? Can i separate the value of the land and the structure and pay long term capital gains on the land and short term on the structure? Or am I just reaching here?
Thanks in advance for your responses, Brian
To my way of thinking, you are acting as a developer. Land development is an active income business. Proceeds from the sale of your developed land is ordinary income to your business, taxed at whatever tax rate applies to your federal tax return (15% to 39%) plus social security and medicare taxes, plus your state and local income taxes.
Don't worry about capital gains tax treatment at all under your strategy -- there aren't any.
Just the way I see it.