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sharedvisions-co
New Member

Does the holding period for LT capital gains on a 2nd home start when the lot is purchased or when the home is constructed and the certificate of occupancy is received?

 
8 Replies
Critter-3
Level 15

Does the holding period for LT capital gains on a 2nd home start when the lot is purchased or when the home is constructed and the certificate of occupancy is received?

Until you get a certificate of occupancy it is not a habitable abode. That is when the house becomes your home. 

AmeliesUncle
Level 11

Does the holding period for LT capital gains on a 2nd home start when the lot is purchased or when the home is constructed and the certificate of occupancy is received?

Interesting question.

 

My first thought is that you sold TWO things:  Land and the building.  As such, the land would be when the lot was purchased.  For the building, there is no difference on the tax return for selling a 2nd "home" versus just a "building".  So because you are selling the "buiding" (rather than a "home") I would use the date that the building was finished.

Carl
Level 15

Does the holding period for LT capital gains on a 2nd home start when the lot is purchased or when the home is constructed and the certificate of occupancy is received?

I can't speak for other locations. But in my county that first year's property tax that includes tax on  the structure starts on the date the COO is issued. It has nothing to do with when construction was actually completed.

sharedvisions-co
New Member

Does the holding period for LT capital gains on a 2nd home start when the lot is purchased or when the home is constructed and the certificate of occupancy is received?

As a second home the sale will be the sale of a capital asset. If the house was never built and the land subsequently sold it would also be treated as a capital gain. So, is habitability a fair test?

sharedvisions-co
New Member

Does the holding period for LT capital gains on a 2nd home start when the lot is purchased or when the home is constructed and the certificate of occupancy is received?

If I buy a home and subsequently make improvements I would not for tax purposes bifurcate the home purchase and improvements for different holding period treatment. The improvements would increase the cost basis but the initial home purchase would start the holding period calculation. So, would the construction of the house be an improvement to the lot and therefore the holding period starts with the purchase of the lot?

AmeliesUncle
Level 11

Does the holding period for LT capital gains on a 2nd home start when the lot is purchased or when the home is constructed and the certificate of occupancy is received?


@sharedvisions-co wrote:

If I buy a home and subsequently make improvements I would not for tax purposes bifurcate the home purchase and improvements for different holding period treatment. The improvements would increase the cost basis but the initial home purchase would start the holding period calculation. So, would the construction of the house be an improvement to the lot and therefore the holding period starts with the purchase of the lot?


But it IS two separate things, the building and the land.  If you make improvements to the house it is still ONE thing: the house.  

 

When selling real estate used as a rental or for a business, the land IS reported separately from the gain from the building.

Anonymous
Not applicable

Does the holding period for LT capital gains on a 2nd home start when the lot is purchased or when the home is constructed and the certificate of occupancy is received?

you may have to consult state law to determine when ownership begins because the IRS says it begins on the day after the date of acquisition.    So exactly when does the acquisition of a house you're building on land you already own begin? 

sharedvisions-co
New Member

Does the holding period for LT capital gains on a 2nd home start when the lot is purchased or when the home is constructed and the certificate of occupancy is received?

That’s the million $ question! Do you have an IRS pub you can reference for the date of acquisition statement? I may have missed it but I’ve looked at Pub 409, 523 and 527 and did not find definitive guidance.

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