Question for J. Hyre - Posted by AnnT

Posted by JHyre in Ohio on October 02, 2003 at 14:01:01:

Cap gains rates.

John Hyre

Question for J. Hyre - Posted by AnnT

Posted by AnnT on September 30, 2003 at 10:36:05:

Can you shed any light on this debate we have:

If a taxpayer owns an apt. rental building and wants to convert it to condos and sell them individually, will he be entitled to capital gains tax rate on the sale or will the sales be considered ordinary income (because he now has an inventory of condos)? He has a full-time job and just happens to have owned an apt. building for 10+ years. This is a one-time deal and he does not plan on buying apt. buildings to convert in the future. He doesn’t do anything else involved in real estate.

I have been searching the IRS website but can’t seem to find the correct answer.

I think that he would be entitled to capital gain treatment and my friend thinks he now has an inventory which would result in ordinary income tax rates applying to the gain on the sale of each condo.

Thanks in advance.