Please Help Me! Tax Consequences Of Land Sale
I bought a piece of land in florida for 40,000 , I sold it for 210,000 will i have to pay capital gains of 170,000??
I understand there are no writeoffs for sale of land, compared to sale of a home??
can someone answer this for me? thanks. Joe.
Funny that your screen name is joeTAXman and you are posting a tax question.
The answer to your question is yes, your $170K profit is taxable. Whether the capital gains tax rate applies, or, the ordinary income tax rate with self-employment income taxes as a bonus depends upon whether you flipped the property for quick profits or had been holding long term for appreciation.
Now, would he be able to deduct property taxes paid over the years, special assessments paid, and broker fees on the sale? I ask because I am in a similiar situation.
I purchased a lot for $69K. I have paid $12K in taxes and special assessments (mostly special assessments. I intend to sell it for $99K with 3% going to realtor. I purchased this lot 1.5 years ago with the intention of building a multifamily but will be selling it instead
Yes, the property taxes and any interest paid on the land would add to the basis of the land so it would decrease the amount that you will have to pay taxes on.
No, property taxes and interest are not capitalized. Property taxes are deductible on Sch A and interest is deductible, with limitations, as investment interest. Broker's fees would reduce the proceeds on sale.
blueford,
I agree with you if the land is investment property.
However, for flip property that is treated as inventory to a Schedule C activity, all the costs you mention are holding costs that are included in the cost of good sold. They are not expensed at all, but are adjustments to cost basis, at the time of sale.
Just the way I interpret Schedule C and dealer dispostions.
I agree. I was assuming it was investment property. Didn't sound like a dealer situation.