I inherited four RE properties. My intent from the beginning is to rehab and sell. As I am managing all of the work, I anticipate a time-frame of 3-5 years to get them all ready and sold.
My main business is tax prep and consulting but, flipping houses is new to me in regard to taxes.
I would appreciate advice on what would be most beneficial taxwise. Should I create a Sch C business and inventory the properties? Two are expected to sell at a gain, the other two at a loss. I also anticipate 1 or 2 sales per year.
At my age a capital gains loss at 3K a year would likely outlive me.
Does it make sense for me to create a business for this venture?
@anuenue it sounds like you could fall somewhere in the middle, so I get why you’re looking for ideas on how to fall on the right side of the line.
Some tricks I’ve heard are to create a new LLC for each one with the word “investments” in it. This by itself would be hardly enough to determine which way it will fall, but it could play a small role in the eyes of the IRS if they ever look at it.
Think the more important issues are how long you own the property, how much income you make from the property while you own it, how many improvements you make to it and what it looks like your original intent was when you bought it.
I saw Seth posted a new blog about this not long ago. You might want to look at that too for some ideas on what to look at.
https://retipster.com/real-estate-dealer-vs-real-estate-investor/
If you’re really concerned about it, an good CPA could give you much better feedback about how to get classified the way you want to be, if it’s even possible at all.