Finishing up a condo development

[Jason Mak]

Wanted to check in with BP and see if anyone had any experience with selling condos and any advice how on to be tax efficient.

I'm currently constructing a 37 unit condo project and plan to sell the condos individually at retail price.  As I understand, most developers who do this have to pay capital gains on each of the condos and there really isn't any way to do an exchange unless I purchase 37 individual condos elsewhere.  So a 1031 exchange might be out of the question.

Alternatively, instead of selling the condos, we could perhaps "lease to own" the property for 12 months in order to reclassify the condos as a long term capital gain which would result in being a taxed a lower capital gain %.  

Was wondering if anyone had any experience with this and any advice.

Thanks

Jason

[Dave Foster]

@Jason Mak, As the developer you are not going to get capital gains out of that project - it's inventory and will be taxed that way. 

I sold some land I had owned for over a year  once on an installment sale to an entity that was also us once and that entity went ahead and developed and sold lots (under attorney direction at $25K for the structure).  That entity paid ordinary income on the profit.  But the bulk of the profit was in the installment sale which was taxed at capital gain.   

The concept is called land banking and has to be done very carefully.  You may have already crossed a thresh hold but it would be worth an attorney opinion.