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?

Comments(4)

  • commercialking13th August, 2005

    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.

  • villageinvestor14th August, 2005

    Thanks King. That is pretty much what I had figured, although what sort of stock entity are you refering to?

  • MarleneM30th September, 2005

    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.

  • Texashousebuyer11st October, 2005

    I recommend you contact your local CPA

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