Tax Options for Developing and Selling Appreciated Land
Learn potential tax strategies to achieve more favorable capital gain treatment in dispositions of appreciated land.
Of paramount importance to any real estate owner or developer is the structuring of their ownership and sale of their properties to minimize taxes, thereby increasing their after-tax investment returns. For those owners, it is critical to obtain favorable capital gain tax treatment upon their dispositions of their properties. The planning for favorable tax treatment begins prior to the purchase of the property when the ownership entity is established and continues throughout the ownership of the property and upon eventual disposition.
Accordingly, taxpayers and their advisers must be aware of the nuances in the characterization of the gains as capital gain or ordinary income upon the sale of highly appreciated real estate. With the top ordinary-income rate being nearly double the capital gains rate, the impact can be substantial. There are also plenty of tax traps for the unwary that could be inadvertently triggered, resulting in large unintended tax consequences. Moreover, tax strategies to preserve capital gains need to be fully explored to reduce the overall tax burden. Finally, tax deferral or charitable alternatives can provide many tax planning opportunities outside of the traditional sale or disposition.
• You will be able to describe the factors necessary to be characterized as a real estate dealer or investor and the tax implications of such characterization.
• You will be able to discuss potential tax strategies to achieve more favorable capital gain treatment in dispositions of appreciated land.
• You will be able to identify common tax issues and their consequences for a real estate developer in the structuring of real estate transactions involving a partnership.
• You will be able to recognize alternatives for disposing of appreciated land in unconventional ways.