Ordinary Income or Capital Gains

[libertytaxseguin@gmail.co]

I have a client that has been buying & selling land for the past 3 years. This year he wants to report capital gains on the long term sales. So is it Ordinary Income (Sch-C) or Capital Gains?
I understand why he wants to do this (lower tax rate), but I have not been able to find IRS code or publication that addresses this scenario.

[TaxGuyBill]

Unfortunately, it can be a really tricky "gray area" to determine if it is a "business" or just an "investment". Nobody will be able to give you a definitive answer, but here are a few thoughts:

Factors may include how many transactions are being done, and how much the taxpayer depends on the money. The "Business versus Hobby" rules might be something that you would look at help make that determination: https://www.irs.gov/newsroom/busines...for-deductions


How have the sales been treated in the past? Has anything changed that would change how it should be reported?

If the sale is treated as an Investment (for capital gain treatment), then if.when properties are sold at a loss, they could be to the $3000 limitation. The taxpayer can't pick-and-choose how it is treated based on the best outcome.

Here is an interesting article in this regard (that deals with Stock Exchange transactions), that may be of interest: https://www.forbes.com/sites/robertw.../#2fe9091a34b0