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Fastyz450
New Member

Speculative building

I am a licensed residential builder in AZ. I paid sales tax on all the materials to build a house. When I sell it will I be required to pay federal and state income tax as well as capital gains tax? Seems like like when it's all done someone else gets about 50% of the dollars generated from the project!

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1 Reply

Speculative building

not so fast. if your business is building houses, the iRS views this as a business activity (not an investor activity) and the sale of inventory which produces ordinary income. discuss your activity with a tax advisor.  Depending on the tax structure of the entity doing the building you could also be liable for self-employment tax

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