Investor A (individual) contributed funds to real estate investment in Year 0. Investor A received proceeds including a gain from that investment in year 3. This info alone suggests LT capital gain for Investor A, correct? Here are other supporting details if they even matter: Investor group consisting of A and a third party LLC contracted with Seller of the property to buy that property with deposits in year 0, 1, 2 and 3 along with lump sum balance in year 3. The Investor group improved the property's entitlements over the 3 years and sold the property to an outside buyer in year 3, simultaneously receiving funds from the outside buyer and paying off the outstanding balance to the original Seller. Investor A was 100% passive participant while the LLC was actively involved in the entitlement improvements to the property. Still a LT capital gain for Investor A?

yes still lTCG for A; most rental real estate is held more than one year it is usually subject to the reduced capital gains rate. This is one of several key tax advantages of owning investment property