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Taxes on selling home under construction

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Junior Member
What is the name of your state?I was building a home in Virginia on my own land. The builder hired incompetent subcontractors and generally messed the project up. The builder "bought me out" for all my costs to date plus several thousand dollars.

I was under the impression that as I was building a primary residence, that I would not have to pay taxes on the proceeds from this sale. I asked the IRS and they defined the proceeds as short term capital gains as I never lived in the home (the project was still in the framing stage) and bought and sold in 11 months- not quite one year.

This seems to bad to be true, and adds insult to injury of having to give up my land/dream home. Does anyone out there have any advice? I have been told that this happens all the time, but I cant find any information on such a situation on the web
 



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