Capital gain Ordinary Income Tax on rental to be demolished

[Kevin Kittilsen]

I run a family owned general contractor business (custom homes). However, I am not a registered principal of the company (s-Corp). My mom and dad are the two registered principals as they started the company 30+ years ago. As part of my investment portfolio as well as to secure properties for our tear-down/ rebuild business I personally purchase (with my own funds) existing homes in the downtown area of the suburbs we build in with the intention to rent them out over several years and then eventually sell the property to the business to demolish the old homes and tear down/rebuild. These properties are typically duplex or single family homes. My accountant has told me that I will always have to file tax on this type of investment as ordinary income rather than capital gains no matter how I structure it. I am hesitant to take their word on this 100%. Looking for some opinions/ experience here. Thanks much!