Developer or Investor

[menawach]

If an individual buys property as an investment and later
builds a house on that property to sell is he an investor or
a developer.

Ricardo Smith, EA
Dunlap TN

 

[Seth Breidbart]

If an individual buys property as an investment and later
builds a house on that property to sell is he an investor
or a developer.

I'd say that's very fact-based.

If he does it more than once, he's a developer.

If he builds it himself, he's certainly a developer.

If he gets a developer to build it, he _might_ remain an investor.

If he sells it to a developer, he's an investor.

Seth

 

[Dick Adams]

If an individual buys property as an investment and later
builds a house on that property to sell is he an investor
or a developer.

And the correct answer is IT DEPENDS!

I know a man who purchased a piece of property and built a
house on it acting as his own general contractor. He did
this in 1992/1993. He sold the house in 2004. He hit the
jackpot on the tax break.

If you develop of propertry and live in it for at least
three years, you are a homeowner. If you are developing
multiple properties. you are a developer.

Dick

 

[mmm]

If an individual buys property as an investment and later
builds a house on that property to sell is he an investor or
a developer.

Depends. What is his line of business? What's he going to do
with the property once the house is constructed? Live in it,
rent it, sell it? You haven't given enough info to answer
your question. Let say he sells it, if he's a real estate
developer, then selling the property will result in ordinary
income to him. If he's not in the real estate business, then
he'll likely be able to get capital gain treatment upon
disposition.