Sean Purchased Vacant Land in 2005 That She Subdivided for Resale

question 69

Multiple Choice

Sean purchased vacant land in 2005 that she subdivided for resale as lots.All 10 of the lots were sold during 2011.The lots had a tax basis of $7,000 each and sold for $45,000 each.Sean made no substantial improvements to the lots.She acted as her own real estate broker; so there were no sales expenses for selling the lots.Which of the following statements is correct?

• A) Sean must hold the lots for at least 10 years before she is eligible for the special capital gain treatment of § 1237.
• B) The $380,000 gain from the sale of the ten lots is all ordinary income.
• C) All of the $380,000 gain from the sale of the ten lots is long-term capital gain.
• D) To be eligible for the special capital gain treatment of § 1237, Sean must be a real estate dealer.
• E) None of the above.

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Definitions:

Aggressive

Exhibiting behavior that is forceful, hostile, or attacking, often with the intent to dominate or intimidate.

Warlike Play

A form of play in children that involves themes of conflict, battle, and aggression, often reflecting societal values or personal development.

Attachment

The emotional bond that forms between individuals, such as between parents and children, providing a sense of security and safety.

Reciprocal

A mutual or two-way exchange or interaction between parties.