Submitted By: someone
Answered: October 24, 2022 11:58 pm

I owned land held for real estate development but sold it before any construction began. How do I treat my gain

Whether gain or loss on the sale of the land held for development is ordinary income (or loss) or capital gain (or loss) depends on the situation. If land is held as inventory for sale to customers in the ordinary course of business, then gain or loss is ordinary gain or loss. If land is merely held for investment, then gain or loss is capital gain or loss. The facts of the situation make all the difference. Consider the nature of the acquisition of the property, the frequency and continuity of sales over a period of time, the nature of your business, your activity with regard to the property (e.g., whether there’s been any development), and the extent of the transactions (e.g., only one versus numerous sales of lots). Discuss your particular situation with a tax professional.

Tax Glossary

Appreciation in value

Increase in value of property due to market conditions. When you sell appreciated property, you pay tax on the appreciation since the date of purchase. When you donate appreciated property held long term, you may generally deduct the appreciated value.

More terms