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Mark D
Mark D, Enrolled Agent
Category: Tax
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Experience:  MBA, EA, Specializing in Business and Individual Tax Returns and Issues
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Can a C corporation pay tax on real property when it is sold

Resolved Question:

Can a C corporation pay tax on real property when it is sold at a capital gains rates or is it at the ordinary income rate?
Submitted: 4 years ago.
Category: Tax
Expert:  Mark D replied 4 years ago.
Hello,

This would actually depend on the business activity of the corporation. If the property was treated as inventory (developer, flipper), the sale and profit on the property would generally be treated as ordinary. If the property was held as a depreciable asset and occupied or rented out (or held for investment), the transaction would generally be treated as a capital transaction. Other factors are also considered, such as how many properties are sold, was sweat-equity a factor in the profit, how long was the property held. All these factors need to be considered as there is no blanket treatment definition. Please let me know if you have further questions or if you can provide more details.

Regards,

Mark D
Customer: replied 4 years ago.
Oil & gas leases that are held for investment is the subject matter. So again if they are sold for a profit by a C corporation can they get capital gains treatment for tax purposes?
Expert:  Mark D replied 4 years ago.
Thank you for the additional information. Yes, the corp can recognize capital gains treatment. The sale of a leasehold interest in oil & gas is considered real property used in a trade or business, making it subject to the capital gain/ordinary loss of Sec 1231. Generally, the holding period would have started when the lease commenced. Please let me know if you have further questions.

Regards,

Mark D
Mark D, Enrolled Agent
Category: Tax
Satisfied Customers: 989
Experience: MBA, EA, Specializing in Business and Individual Tax Returns and Issues
Mark D and other Tax Specialists are ready to help you

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