Three carry-back notes and the installment reporting I assumed I had

I nearly stepped in the same hole on the flip side. Three houses in one calendar year, all sold with me carrying seconds, and my accountant asked how many I'd done before she'd even look at the notes. The count in the year was the first question out of her mouth. Wasn't the structure of the paper at all.

How were the lots held? One LLC for all five, or did you keep the raw 61 acres in one entity and move lots out as you sold?

And how long did you own the ground before the plat went through? You mention fourteen months of selling but not the hold. That's the number I'd want before I decided the improvements were what did it.

The culvert and the drive are what jump out at me. I've built enough access roads to know that once you're putting in drainage structures you look like you're developing, whatever your intent was. Did your CPA weight the improvements heavily or was it mostly the three sales in twelve months?

Dumb question from outside the tax side. Does the buyer's side of this change at all, or is this purely your problem?

@girder I'd push back a little. I've sold parcels off a bigger tract with a gravel drive in and my CPA never blinked. What she cared about was frequency and how I marketed. Listing five lots as a subdivision with a name on the sign reads very differently than selling two parcels to neighbors over six years.

It's facts and circumstances every time, arbor, and I'm sorry your facts landed on the wrong side. But nobody here can tell you the line, including your own CPA with certainty until someone challenges it.

Is dealer property just a label for someone who sells a lot, or is it something you elect? I thought installment sales were something anyone carrying a note could use, so I want to be sure I have this right.

This is the exact scenario I've been worrying about in the background without knowing the words for it. I want the income stream, not a tax bill that arrives before the income does.

@parcel fair, the marketing point is probably doing more work than my culvert theory. arbor, did you have signage and a lot map out, or were these one-off buyers who came to you?

Still think anyone putting in infrastructure before a sale should ask the question early. Costs an hour of somebody's time.

Separate from the gain, the interest on those notes is ordinary income anyway, right? So the deferral was only ever on the 140k, not the 8.5% coming in monthly. Trying to make sure I understand what was actually lost here.

@quill correct, the coupon was always going to be taxed as it came in. The gain treatment was the whole prize and it evaporated.

arbor, discounting a lot 21k to raise 52k is expensive money. Did you price out selling one of the three notes instead? A seasoned 8.5% first on a platted lot with 10% down isn't the cleanest paper in the world, but a partial sale on a few years of payments might have raised the cash for less than 21k of pain. Note buyers will quote you for free.

Cheap markets make this worse, for what it's worth. My price points are low enough that selling four small parcels in a year is a normal year, and I'm always the one who looks like a dealer on volume even though the dollars are tiny.

@thicket's spacing point is the one I'd write down. I've held ground twelve years at a time and the only reason I can space sales out is that nothing forces me to close. If you're carrying paper for the tax treatment, the calendar is a term of the deal just like the rate is.

arbor, thanks for posting the number instead of the shape of it. The 21k is what makes this useful.