Why wouldn’t you believe your CPA and instead ask people who are not experts?
If your original intention was to fix it up and sell it, it is taxed as ordinary income to you. If your original intention was to fix it up to hold and rent, but things changed and you decided to sell it, it could be taxed as long term capital gain if held more than one year.
However, if you choose the long term capital gain route and are audited by the IRS, you will need to convince them your intention was to hold it to rent.
The Scenario: I have a rehab property (a large multi-family), that I have under contract to sell in the next couple of days. I’ve been rehabbing/marketing the property for the past 11 months and a week. The gain on this project is significant and I am trying to determine if there is a tax benefit in holding off the closing until 1 full year ellapses.
I had a conversation with my CPA about this and he indicated that since the property has never been livable or available for rent, the timeline doesn’t matter and it is going to be classified as a short term capital gain no matter if a year goes by or not. I should add, that I am a full time real estate investor and we buy for rehab about 70 properties a year. I do however, hold few rentals, as well.