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And also am I right in the first place that the land belongs with every other construction cost on Sch C and that there is no way to take the land as a capital gain?


Are the construction guys I talked to wrong?

Not necessarily.

If you do enough transactions - build enough houses - to justify the extra cost, you can arrange to hold the land in one entity and do the construction in another.

The entity holding the land is nothing more than a real estate speculator. That entity buys land, hoping to sell it to a builder at a later time. The entity doing the building waits until they are ready to build, then buys the land (or enters into a lease for the land).

Viola - the land-holding company gets a capital gain for the land. And the building company has ordinary income from their construction activities.

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