Be Careful of Capital Gains Treatment

A taxpayer bought over 200 unimproved lots over an 8 year period.  He did not improve or subdivide the lots.  His strategy was to buy at a bargain, hold and make money reselling them.  42 lots were sold over a two year period and he claimed his profit as capital gains.  The Court held however that with so many sales, he was a dealer in realty and his profit was taxed as ordinary income and he also owed self-employment tax on the profits earned.  Please call our office if this situation may pertain to you…there are ways to structure these transactions to ensure capital gain treatment.

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