Are land deals subject to Capital Gains taxes like home sales?
It depends. Short term flips less than one year are "short term capital gains" which is ordinary income tax rates. Hold for longer than one year and you'll trigger long term capital gains tax.
This article explains it rather well.
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Thanks Cory!
My CPA told me they’re viewed as Inventory, not capital assets, so the year limit for capital gains doesn’t apply. I pay an ordinary rate of tax on the gain as opposed to the capital gains rate.
@AFlanagan I would like to see which portion of the tax code they're creating that guidance from.
I would imagine it has something to do with the way that you take possession of the property. If you are holding the property as an individual I can see how you would make the case that it is capital gains. If you take the holding as a company whose purpose is to flip the land for profit then I can see how your accountant could come to the conclusion that it's an inventory item.
Clearly your accountant knows more about your situation than I do definitely follow their guidance versus mine.
@AFlanagan I also question what your CPA is drawing his reasoning from. My experience is that just because someone is a CPA, their interpretation and implementation of the tax code is not flawless. Sometimes it is just bad advice. It is never out of line to seek a second opinion.
@Cory Yes, I take possession as a company (LLC) with the sole intention to flip. I think he mentioned it also has to do with intent somehow.