When real property is subdivided into lots and actively sold, the common result is that the gain on sale of the property is subject to ordinary income tax treatment. However, this may not always be the case under Sec. 1237. In certain situations, a taxpayer still may be able to claim capital gain treatment under the five- or 10-year rule, even if the taxpayer subdivides the real property into lots and actively tries to sell the parcels.
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