Condo conversion sales question

[Andy M]

Hi,

I'm in the process of buying a 3-family and converting it to condos in Cambridge, MA.

I bought the place for 655k. Lets say i sell each unit for 330k and incur 120k in lawyer fees, closing costs, renovations, commissions, etc.

My question is then:

Say I sell only 2 of the 3, for a total of 660k. If I don't sell the third immediately, do i owe any taxes?

One might think that I haven't made a net profit yet so no tax. Alternatively though, we could say that if we split my costs between the units (a cost "basis" per unit) then I have made a profit so I owe tax.

I think the latter of the above is correct, but I wanted to check to make sure because if its the former then that would be great.

(I could live in the 3rd unit and sell it in 2 years to take the profit tax-free and in the mean-time I could take 80% LTV out of it to keep investing.)

Andy