Real estate values are scorching hot in many parts of the United States. If you're sitting on some big-time appreciated property, check out the following three strategies for minimizing your tax bill:
Strategy 1: Establish an S corp to develop and sell appreciated land
Say you own acreage (individually or in partnership with others) that's ripe for subdivision into lots that you could sell off for major gains. Your tax planning goal here is to characterize as much profit as possible as long-term capital gain, which is eligible for the ultralow 15 percent maximum federal capital-gains rate.
That requires some planning because the tax code generally treats subdividers as "dealers" in real estate. Lots owned by dealers are considered "inventory." And profits from inventory sales are considered ordinary income taxed at your regular federal rate (up to 35 percent). Ugh!
Cut tax on pre-development appreciation
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