Rental Property Investor · Laredo, TX · Member since 2019 · 1 post · 0 votes
Does anyone have experience splitting raw ranch land from 80 acres to 10 acres lots and offering owner finance. I was thinking of offering 8.75% apr in 15 year notes?
Accountant · Slidell, LA · Member since 2019 · 382 posts · 272 votes
7y
@Jason Quesada I have clients that subdivided lots without the proper tax planning and it didn't work out so well for them. The IRS classifies a person or company that subdivides property and then sells it as a dealer, which means that the property is considered inventory and you pay ordinary income tax, plus SE tax on the sale (less operating expenses). You will also pay that tax in the year that you sell the property, even if you finance the sale, so no deferring gains with an installment sale. Check with a CPA that is familiar with strategies to mitigate taxes for subdividing property. If you can't find one, then PM me and we can setup a short strategy conversation.