Land Developer Saves $98,000 with Installment Sales and Entity Strategy
I develop residential lots in northeast Florida. The profit margins on lot sales can be large, and without proper planning, the tax bills are brutal. My previous CPA reported every lot sale as ordinary income in the year of closing with no strategy whatsoever.
AE Tax Advisors implemented several strategies that reduced my tax liability by $98,000. First, they structured eligible lot sales as installment sales under Section 453, spreading the gain recognition across multiple tax years and keeping me in lower brackets each year. Not every sale qualifies, but the ones that do made a big impact.
Second, they set up proper entity structures for each development project. Each subdivision now operates in its own LLC, which provides liability protection and allows for cleaner accounting of development costs. The entity structure also makes it easier to bring in investors on specific projects without commingling assets.
Third, they identified infrastructure improvement costs that qualified for immediate deduction rather than capitalization. Road construction, water and sewer installations, and stormwater management systems had been improperly capitalized by my old CPA when portions should have been deducted as development costs.
The team understood the land development business from start to finish -- entitlement costs, horizontal improvements, vertical construction, lot sales, builder relationships, and the timing of when expenses hit. They designed a tax calendar for my development pipeline so I know exactly when to expect deductions and income recognition.
If you are in the land development business, AE Tax Advisors understands the complexity. They saved me $98,000 and created a repeatable framework for future projects.