dsellinger[at]gmail.com
- quote -

We are on the same page so far. And note the holding period
for the house begins when it is completed.

- quote -

In the OP's situation, the owner of the land added capital to
the land creating a second asset. To make the situations
analogous, the shareholder would take the conversion and buy
additional shares.

Dick

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Victor Roberts xxx[at]lighting-research.com wrote:
- quote -

Keep in mind - the bulk of his profits come from the general
contractor (GC) fees he avoided by doing the work himself.
He certainly does not want to pay himself so he can pay the
self-employment taxes.

Also since he acted as his own GC, he may have a problem
convincing an auditor that the house was intended to be
his personal residence.

But even before you get that far, his gain on the house is
ordinary income because he did not own the house for at least
the year. He may have an argument on the land.

Dick

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Dick Adams <rdadams[at]smart.net> wrote:

- quote -

Usually one built to your specifications as opposed to a
mass produced home or even an individual home built to an
existing plan.

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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Stuart A. Bronstein wrote:
- quote -

Isn't the whole idea of building a house to sell considered
an investment? Besides an owner may have bought property
with the idea of keeping it, but market forces are such that
selling it would be considered the wisest use of said asset.

In~vest~ment n. - Property or another possession acquired
for future financial return or benefit.

And long term is defined by the IRS as longer then one year.

Unless there are some rules about holding periods being
somehow "reset" by a major change to a property. (Could the
issuance of new higher valued stock in a takeover be viewed
in the same way? would your initial date of ownership be for
the issuance of the new stock, or for the date you bought
the original now taken over companies stock.)

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"Wayne Rivers" <wayne[at]wayneriverscpa.com> wrote:

- quote -

It's ordinary income because he built it to sell, not as a
long term investment.

Stu

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"Wayne Rivers" <wayne[at]wayneriverscpa.com> wrote:

- quote -

What is a "spec home"? If "spec home" means he built it on
the 'speculation' of making a profit, then his profits are
ordinary income.

Dick

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Question:

If someone owns land and builds a spec home on it and later
sells it, is the capital gain long term because the land is
owned over 1 year or short term because the house is sold
soon after completion?

In this case, the taxpayer is not planning on doing this as
a business - should be a one-time shot. He did the general
contracting himself.

Thanks

Wayne Rivers, CPA

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