Question for you property flippers....

[RiverOtter]

If you buy a preconstruction condo, take it to hard contract, hold it for 12 months, then sell or reassign the contract to someone else, will you be taxed at ordinary income or long term capital gains tax?

 

[Smiling JOe]

If you buy a preconstruction condo, take it to hard contract, hold it for 12 months, then sell or reassign the contract to someone else, will you be taxed at ordinary income or long term capital gains tax?

I am not an accountant, but I bet my accountant would say that if you hold it 1yr + 1day from the date of closing (not date of contract), you will be taxed on the long term capital gains, currently no greater than 15%. Sell it two days earlier and get ready to fork out the big bucks (ordinary income tax rate).

 

[RiverOtter]

I am not an accountant, but I bet my accountant would say that if you hold it 1yr + 1day from the date of closing (not date of contract), you will be taxed on the long term capital gains, currently no greater than 15%. Sell it two days earlier and get ready to fork out the big bucks (ordinary income tax rate).

So you have to actually close on the property and hold it for 12+ mos. Hard Contract does not count?

 

[Smiling JOe]

So you have to actually close on the property and hold it for 12+ mos. Hard Contract does not count?

That is correct, Sir.
With a hard contract, you have only equitable interest in the property, but you are not the "owner." The owner is listed on the Warranty Deed, which will show the owner as the Development, until the time of close. The IRS is looking at length of time for "ownership" to calculate tax rate.

 

[RiverOtter]

That is correct, Sir.
With a hard contract, you have only equitable interest in the property, but you are not the "owner." The owner is listed on the Warranty Deed, which will show the owner as the Development, until the time of close. The IRS is looking at length of time for "ownership" to calculate tax rate.

Another example of the "Man" trying to keep a brotha down

 

[SoWalSally]

I am not an accountant, but I bet my accountant would say that if you hold it 1yr + 1day from the date of closing (not date of contract), you will be taxed on the long term capital gains, currently no greater than 15%. Sell it two days earlier and get ready to fork out the big bucks (ordinary income tax rate).

Except securities, jewelry, art, snowdome collections, whatever, if held for one year and then sold at a profit are all considered long-term capital gains, correct?

Why would a contract be any different?

 

[Smiling JOe]

Except securities, jewelry, art, snowdome collections, whatever, if held for one year and then sold at a profit are all considered long-term capital gains, correct?

Why would a contract be any different?

I AM NOT AN ACCOUNTANT. IS THERE AN ACCOUNTANT AVAILABLE?

My guess is:
The IRS interprets a signed contract as having only equitable interest and does not mean that you own the property. To "hold" property means to "own" property, rather than having only equitable interest. The IRS is looking for the date which the money is exchanged for the property (the exchange of goods). That would be the date of closing. It makes sense to me.

Question -- What are snowdome collections???

 

[landlord]

Smiling Joe is correct. in order for the one year period to commence, you must hold both equitable and legal title. a purchase agreement only transfers equitable title.

 

[Bob]

Smiling Joe, I think snowdome collection refers to those water-filled souvenirs available at Wal-Mart and other fine retailers. It could also refer to old guys w/dandruff driving around in their Sebring convertibles.

 

[Kurt]

Smiling Joe is correct. in order for the one year period to commence, you must hold both equitable and legal title. a purchase agreement only transfers equitable title.

Leave it to the Landlord.

Are you cpa?