Question
Sanchez purchased raw land three years ago for $1,500,000 to develop into lots and sell to individuals planning to build their dream homes. Sanchez intended
Sanchez purchased raw land three years ago for $1,500,000 to develop into lots and sell to individuals planning to build their dream homes. Sanchez intended to treat this property as inventory, like his other development properties. Before completing the development of the property, however, he decided to contribute it to RGV Investors LLC when it was worth $2,500,000, in exchange for a 10 percent capital and profits interest. RGVs strategy is to hold land for investment purposes only and then sell it later at a gain.
- If RGV sells the property for $3,000,000 four years after Sanchezs contribution, how much gain or loss is recognized and what is its character? {Hint: See 724.}
- If RGV sells the property for $3,000,000 five and one-half years after Sanchezs contribution, how much gain or loss is recognized and what is its character?
Note: Use proper internal tax research written communication format (see below). I recommend you keep it to no more than one page, 12 font size, word document. If you have taken the tax research course and format is slightly different, I will accept that format. Otherwise, you can use the following research format:
Facts (restatement of scenario):
Issue (tax question(s)):
Findings/discussion as it relates to question a (including citation references and final answer as it relates to this question should be clear and located in the last paragraph/sentence:
Findings/discussion as it relates to question b (including citation references and final answer as it relates to this question should be clear and located in the last paragraph/sentence:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started