CPA Question on exit strategy

[Ginger P.]

Hello,

I've been searching for the answer to this question, but can't seem to find a solid answer - looking for a CPA who knows.

I purchased a SFH in 2014 with the intent to rent it out (which I have) and eventually tear it down and build a home on the lot for my personal residence. It's been rented since 2014 and the dirt has appreciated ~$150K. I know if I sell, I"ll pay long-term cap gains and depreciation recapture.

However, I'm interested to know if I develop and build a house on the lot then sell - how am I taxed - long-term or ordinary income? I no longer plan to live in this area, so moving into the new house is not an option.

Thanks,
Ginger