Let’s say that you own land that’s ripe for development, but that does not fit into the taxpayer-friendly Section 1237 scenario discussed in the first article of this issue.

Let’s further say that your problem is classification as a real estate dealer on your lot sales. Dealer classification makes your $1 million of appreciation on this land taxable at ordinary income rates of up to 35 percent.

How would you like that $1 million taxed at capital gains rates of up to 15 percent rather than at ordinary income rates of up to 35 percent, for a savings of $200,000 or so?

To create the savings, you create a developer entity. The developer entity buys the land from you and then develops the property. With this ... Log in to view full article.