Tax Director Daniel Smith’s article about tax issues in the sale of appreciated land appeared in the August issue of the Mann Report.
The Mann Report
By Daniel Smith, Director, Tax & Business Services
When land is sold, it is often assumed that long-term capital gains rates apply to the transaction. However, if land is held for sale to customers in the ordinary course of business, the investor may be considered a dealer in real estate. The land would be considered inventory, and the sale would be taxed as ordinary income rather than as a long-term capital gain.