Replies

Under Section 2(a) 16, "used property" is property on which (A) tax has been paid or (B) held for other than for a business purpose on 12/31/06. I quite agree that there is no such thing as "new land" (other than volcanic lava), but that doesn't seem to be the definition. If land is held for other than business purposes on 12/31/06, then it would be exempt under subsection (B). But if land was held for a business purpose, then it would seem to be taxed the next time that it is sold.

But if land was held for a business purpose, then it would seem to be taxed the next time that it is sold.

Business to business transactions aren't taxed. Only when sold for retail consumption.

But if land was held for a business purpose, then it would seem to be taxed the next time that it is sold.

Where it is held in business for sale it qualifies for a transitional inventory credit to assure prior federal income and payroll taxes are not passed on to the customer in price.

H.R.25

Fair Tax Act of 2005 (Introduced in House)
http://thomas.loc.gov/cgi-bin/query/z?c109:H.R.25:

`SEC. 902. TRANSITION MATTERS.

`(a) Inventory-

`(1) QUALIFIED INVENTORY- Inventory held by a trade or business on the close of business on December 31, 2006, shall be qualified inventory if it is sold--

`(A) before December 31, 2008;
`(B) by a registered person; and
`(C) subject to the tax imposed by section 101.

`(2) COSTS- For purposes of this section, qualified inventory shall have the cost that it had for Federal income tax purposes for the trade or business as of December 31, 2006 (including any amounts capitalized by reason of section 263A of the Internal Revenue Code of 1986 as in effect on December 31, 2006).
`(3) TRANSITIONAL INVENTORY CREDIT- The trade or business which held the qualified inventory on the close of business on December 31, 2006, shall be entitled to a transitional inventory credit equal to the cost of the qualified inventory (determined in accordance with paragraph (2)) times the rate of tax imposed by section 101.
`(4) TIMING OF CREDIT- The credit provided under paragraph (3) shall be allowed with respect to the month when the inventory is sold subject to the tax imposed by this subtitle. Said credit shall be reported as an intermediate and export sales credit and the person claiming said credit shall attach supporting schedules in the form that the Secretary may prescribe.

`(b) WORK-IN-PROCESS- For purposes of this section, inventory shall include work-in-process.

`(c) Qualified Inventory Held by Businesses Not Selling Said Qualified Inventory at Retail-

`(1) IN GENERAL- Qualified inventory held by businesses that sells said qualified inventory not subject to tax pursuant to section 102(a) shall be eligible for the transitional inventory credit only if that business (or a business that has successor rights pursuant to paragraph (2)) receives certification in a form satisfactory to the Secretary that the qualified inventory was subsequently sold subject to the tax imposed by this subtitle.
`(2) TRANSITIONAL INVENTORY CREDIT RIGHT MAY BE SOLD- The business entitled to the transitional inventory credit may sell the right to receive said transitional inventory credit to the purchaser of the qualified inventory that gave rise to the credit entitlement. Any purchaser of such qualified inventory (or property or services into which the qualified inventory has been incorporated) may sell the right to said transitional inventory credit to a subsequent purchaser of said qualified inventory (or property or services into which the qualified inventory has been incorporated).

Other Credits available for non business assets converted to business use etc. also are provided in `CHAPTER 2--CREDITS; REFUNDS, & CHAPTER 7 -- SEC. 705. MIXED USE PROPERTY.