doubleg10
Level 3

I know that there are nuances regarding the tax laws that surround flipping of houses and that a dealer is different than an investor.  Also, my research has found that the tax treatment can depend on a case-by-case scenario.  Unfortunately, my research is still coming up short on my specific situation.

A client purchased a home in 2017 with the intent to fix it up and rent it out.  About 98% of the work was done by himself and his friends over the last few years.  His total remodel/fix it costs (exclusive of the original 2016 purchase price) are $140k. Of the $140k, $90k was incurred within the 12-month period prior to the sale of the property in April 2019.  Due to the current local real estate market and his own personal financial situation, he changed his mind and decided to sell the house and not keep it and rent it out.  The net taxable gain on the sale of the property is $118k.

I cannot definitively find out if the entire gain is long-term or if it has to be split because of the fact that almost 65% of the remodel costs were incurred within 12 months of the sale.

Thank you.

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