Client had to close his business years ago. The neighborhood changed to a residential one from mostly industrial. Realizing he couldn't sell the building as is for any worthwhile amount, he took on some partners and used their capital contributions to gut the building and create individual condominiums, which will be sold over a period of several years (he hopes).
The question is whether the operating losses from the rental activity can be subtracted from the Sec 1231 gains for NYC UBT? Ordinarily, income from real estate rental activities are exempt from the UBT, but can those losses be used to offset the Sec. 1231 gains?
My opinion is that all of the income is exempt because this isn't a regular business for the client. He is simply selling real estate. However, a colleague disagrees so I thought I should get other opinions.
Thanks for any guidance.
- posted 6 years ago