Long or short term capital gain?

[Jason Powell]

I purchased a building October 17, 2017 via LLC, me 50% and one partner 50%. My contribution was 150k.

June of 2019, I sold my 50% share of the LLC to my partner for $250k (building was not sold). I received my principal back in June, and held $100k note in the property which was paid back to me on October 19, 2018 (a year and two days after purchase).

I thought I was being smart by making my gain long term, but now I've been told I'm wrong and it's all short term because I technically "sold" it in June. I'm failing to see how this would be any different than a seller financed sale that spreads cap gains over many years.

Would anyone who's confident of the answer please share? Much appreciated!

[Ashish Acharya]

Originally posted by @Jason Powell:

I purchased a building October 17, 2017 via LLC, me 50% and one partner 50%. My contribution was 150k.

June of 2019, I sold my 50% share of the LLC to my partner for $250k (building was not sold). I received my principal back in June, and held $100k note in the property which was paid back to me on October 19, 2018 (a year and two days after purchase).

I thought I was being smart by making my gain long term, but now I've been told I'm wrong and it's all short term because I technically "sold" it in June. I'm failing to see how this would be any different than a seller financed sale that spreads cap gains over many years.

Would anyone who's confident of the answer please share? Much appreciated.

Sold  on June 2018 right ?

Your gain will be short term.

Also this is not an installment sale because you received the entire payment in the same year. If you had received payment after a close of the tax year, this would be installment sale. 

Based on your note, you might also have an interest component. 

The date of the sale is June 2018.  And you would report entire this year that is subject to short term capital gain rate.