What happens if there are multiple parts to my basis? For example: suppose I bought some vacant vacation land three years ago. Five months ago I hired someone to build my vacation home. It's finished. After one month, I've decided I don't like it. So I sell it and make a profit. I am not in the business of building houses.
I've owned the land for several years, but the house for only a month.
It seems to me that figuring out how to allocate the selling price between the house and the land would be equally important in determining how to tax the gains. Like, the short-term capital gain on zero gain is ... zero.
Has the house had any realistic opportunity to appreciate?
Well the easy part is the cost basis of the land and the cost basis of the improvement. The hard part is the sale proceeds for the land vs the sale proceeds for the improvement when the contract does not provide it. You could research the value of a comparable piece of land you could buy to build a house on. Or, if the county is using market prices in their tax assessment, you could that relationship o land to building to make the determination.
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