Cincinnati Tax Guy
The ultimate goal of taxes planning is to access a zero tax rate. That is a rare species. I have seen only one repeatable fact design within the last few years leading to a zero tax rate, which pattern involved not making much money. The next best plan is capital benefits.
457,600 if you are married) or the web investment tax (3.8%), but let’s limit our dialogue just to the 20% versus 39.6% tax rates. You can bet that the majority of tax alchemy switches into creating capital increases at the expense of regular income. The taxes books is full of instances relating to the sale of capital and land benefits. If you or I sell a bit of raw land, it is incontrovertibly a capital gain almost. Let’s say that you will be a developer, however, and make your living selling land.
- Documentation of your income
- Financial Model Building
- Rental of property incidental to development activities,
- There may be limited investment choices, and none whatsoever with prepaid tuition plans
The answer changes, as land is inventory for you, exactly like that flat screen TV is inventory for Best Buy. Let’s say that I see you successful, and you inspire me to devote less energy to taxes practice and more to real estate. At what point will i become a programmer like you: after my second sale, after my first million dollars, or could it be another thing?
The taxes Code comes in with Section 1221(a), which defines a capital asset by exclusion: every asset is a capital asset unless the Code says normally. Let’s talk about Long, and I am told by you whether we have a capital asset or not. Philip Long lives in Florida, which immediately strikes me as a good idea as we get into winter here.
From 1994 to 2006 he managed a single proprietorship by the name of Las Olas Tower Company (LOTC). Long had a desire and drive to build a high-rise condo, which he would call Las Olas Tower. He is going to build a condo, make thousands and take a seat on a beach. Problem: he doesn’t own the land which to put the condominium. Solution: He has to choose the land.
He finds someone with land, which someone is Las Olas Riverside Hotel (LORH). LORH and LORC are not the same people, by the real way, although “Las Olas” seems a favorite name down there. Long gets into into an agreement to buy land owned by LORH. Long steps up his involvement: he could be reviewing designs with an architect, obtaining government approval and permits, distributing promotional materials, meeting with potential customers. The ground hasn’t even been cleared or graded and he has twenty percent of the condominium units under agreement.