So I'm having a hard time determining if I need to pay long or short term capital gains on a new self storage facility. I started building it in 2015. I built 10 buildings in 2015 - 2016. Then in 2018 - 2019 I added 5 more buildings. As soon as I completed the last bilding I sold the facility. So my question is, do I pay Long term capital gains on the whole thing? Some Long and some Short...How do I calculate this mess? Thanks for any insight on this...BTW..I owned the land outright before i started.
Seems like there is enough money on the line here to put this to a CPA! My gut tells me you will have to "allocate" a portion of your sales price to the land and any improvement made more than 12 months before you sold and then allocate a portion to the buildings you put up within one year of selling. You'll pay LTCG on the older set and STCG on the newer gains. My stance would be that a large percentage of the value in a self storage facility is based on the income stream. If the 5 new buildings weren't generating much income yet, Id say you could justify having them be worth just a bit more than what you paid to put them there. The land and older buildings that were generating more income would clearly be "worth" more based on an income based valuation. This set up would skew your capital gains treatment in your favor (moving more of it to LTCG vs. short). Of course this would be easier to "defend" against audit had you and the buy agreed upon "purchase price allocation".