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Article Date:
December 2009

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Use an S Corp. to Lower Taxes on Subdivision of Land

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.

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