All Forum Posts by: Kevin Kittilsen

I work for a custom design build firm. Many of our custom home projects are in a central down town area where we are demolishing existing older homes and building new homes on lots. I have purchased several properties under their own LLCs. However, my accountant has told me that when I sell the property(s) to a client to build a home on, any gain on the property itself will be taxed as ordinary income. Say I buy a property for $450k and then sell the property for $515k to a client and then subsequently build them a home on the lot, my accountant says that $65k would be taxed as ordinary income. Looking for advice here.

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!