Condo Conversion Tax Consequences
Hello All:
Looking for some advice. I just sold a peice of ground and have $500K and need to exchange into something worth at least $1.2 million. I found a 50 unit apartment complex for sale for $2.5 million that is ripe for condo conversion. After I convert and sell off all of the units I expect to net around $1 million after legal fees, repairs, commisions, etc.. I should sell all of the units in around 18 months time from conversion. I am trying to get an idea on what my tax consequence will be. Any thoughts?
Condo conversions are, as a rule, "dealer activities" and the taxes on the sale are taxed at ordinary income rates. A good tax attorney/accountant may make it possible to shift some of this gain to capital gains rates by passing it through a stock entity but you are pretty much going to give a third or more of the profits to Uncle Sam.
Thanks King. That is pretty much what I had figured, although what sort of stock entity are you refering to?
Commercialking is absolutely right about the dealer status issue. I looked into this quite a bit and could not find a legitimate way around it.
One group suggested they could simply give me title to several condo units as my part of the deal, but I decided I might have to face the auditors alone in a few years, and jail time would put a crimp in my lifestyle.
I recommend you contact your local CPA