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