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1. TheThe PelorusPelorusGROUPGROUP
Tax Advice forTax Advice for
DevelopersDevelopers

2. The Pelorus Group specializes in real estate development. When becoming
a real estate investor or developer, one cannot expect to just buy land or
real estate without considering the tax impact of the purchase. Everyone
these days, especially with the certain state of the economy, is searching
for tax relief. When looking into buying real estate for development and
investing, consider certain tax breaks when looking for the perfect
property. The Pelorus Group recommends seeking out charitable land
contributions and considering land costs for tax purposes. Real estate
investing and developing is a promising career, but it is important to save
money wherever possible in order to gain the most revenue from your
investment.

3. CharitableCharitable Land ContributionsLand Contributions
Has your company thought about contributing land to a county, city, or state?Has your company thought about contributing land to a county, city, or state?
Before contributing property, examine the alternative viewpoints the InternalBefore contributing property, examine the alternative viewpoints the Internal
Revenue Service could take with regard to your charitable motives. If the IRSRevenue Service could take with regard to your charitable motives. If the IRS
can successfully establish that you received a benefit for the charitablecan successfully establish that you received a benefit for the charitable
contribution, your deduction may be limited or fully disallowed.contribution, your deduction may be limited or fully disallowed.
For example, if your company contributes land to a county and also receives aFor example, if your company contributes land to a county and also receives a
zoning permit from that county to build a shopping center, the IRS could viewzoning permit from that county to build a shopping center, the IRS could view
this as your company receiving a benefit for the contribution. The charitablethis as your company receiving a benefit for the contribution. The charitable
contribution may be required to be permanently capitalized to land orcontribution may be required to be permanently capitalized to land or
depreciated over the asset life.depreciated over the asset life.
Another example would be if your company contributed land to a state for aAnother example would be if your company contributed land to a state for a
state-maintained road. If your company is not directly benefiting from thestate-maintained road. If your company is not directly benefiting from the
road and you can argue that the road is for “exclusive public use” then theroad and you can argue that the road is for “exclusive public use” then the
contribution may be fully allowed.contribution may be fully allowed.

4. LandLand CostsCosts
When a developer purchases a tract of land with the intention of developing and selling the parcelsWhen a developer purchases a tract of land with the intention of developing and selling the parcels
over time, the cost of the land must be allocated to each parcel. The IRS requires that the cost beover time, the cost of the land must be allocated to each parcel. The IRS requires that the cost be
“equitable apportioned.” However, there is very little guidance on how to do so.“equitable apportioned.” However, there is very little guidance on how to do so.
With appropriate tax planning and consideration, the developer may be able to defer income uponWith appropriate tax planning and consideration, the developer may be able to defer income upon
the sale of the land parcels. However, the taxpayer cannot defer the gain until all of the property isthe sale of the land parcels. However, the taxpayer cannot defer the gain until all of the property is
sold, but must recognize it as each parcel is disposed of. A taxpayer should be cautious in choosingsold, but must recognize it as each parcel is disposed of. A taxpayer should be cautious in choosing
a method without tax planning, as this may be considered an accounting method and only can bea method without tax planning, as this may be considered an accounting method and only can be
changed by obtaining IRS approval.changed by obtaining IRS approval.
Current and future land improvement costs also should be considered when allocating the costCurrent and future land improvement costs also should be considered when allocating the cost
among land parcels. Future costs even may be incurred after several of the parcels are sold;among land parcels. Future costs even may be incurred after several of the parcels are sold;
however, those parcels still can benefit from the improvement and therefore should be allocated anhowever, those parcels still can benefit from the improvement and therefore should be allocated an
estimated cost.estimated cost.
There are many tax saving ideas and strategies that can be maximized if careful planning andThere are many tax saving ideas and strategies that can be maximized if careful planning and
consideration is taken in advance. Be sure to take advantage of those tax benefits and be cautiousconsideration is taken in advance. Be sure to take advantage of those tax benefits and be cautious
in choosing accounting methods to ensure that your company is minimizing its tax liability. Consultin choosing accounting methods to ensure that your company is minimizing its tax liability. Consult
a qualified tax adviser to discuss tax strategies in detail and to determine if they are relevant toa qualified tax adviser to discuss tax strategies in detail and to determine if they are relevant to
your company.your company.

5. Brought to You by:Brought to You by:
TheThe PelorusPelorusGROUPGROUP
For More Information Please Visit Us At:For More Information Please Visit Us At:
http://http://www.thepelorusgroup.comwww.thepelorusgroup.com//

6. Brought to You by:Brought to You by:
TheThe PelorusPelorusGROUPGROUP
For More Information Please Visit Us At:For More Information Please Visit Us At:
http://http://www.thepelorusgroup.comwww.thepelorusgroup.com//