capital gains on subdivided property?

Dr. Venkman

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4:51p, 5/15/17

AG

If I buy a property with 20 acres and immediately subdivide and sell 5 acres, do I pay capital gains or other tax on the 5 acres?

libertyag

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In reply to Dr. Venkman • 6:51p, 5/15/17

AG

Dr. Venkman said:
If I buy a property with 20 acres and immediately subdivide and sell 5 acres, do I pay capital gains or other tax on the 5 acres?

If you make no improvements like roads, infrastructure, etc. then it would be capital gain. However, if you immediately sell it you would have a short term capital gain.

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Dr. Venkman

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In reply to libertyag • 9:22a, 5/16/17

AG

Thanks. And what would the taxes be based on? Sale price? Selling immediately there would be no appreciation, right?

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combat wombat™

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9:21p, 5/16/17

AG

If you are a developer you may have ordinary income. I don't really have enough information to advise you. However I would recommend you speak with your CPA.

Did you make any improvements to the property? Did you buy this in personally or did your business purchase the land? How do you earn your living?

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Dr. Venkman

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8:21a, 5/17/17

AG

I purchased this as my personal property with the intent to subdivide to lower my mortgage. I didn't make any improvements. I'll talk with my CPA.

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In reply to Dr. Venkman • 9:18a, 5/17/17

AG

Dr. Venkman said:
Thanks. And what would the taxes be based on? Sale price? Selling immediately there would be no appreciation, right?

You would need to allocate your original purchase price between the part you are selling and the part you are keeping. The gain would be measured by the difference in the sales price and the basis allocated to the part you are selling.