If your client is truly flipping houses, the IRS classifies individuals who actively purchase and remodel real estate for profit on a continuing basis as dealers rather than investors. For these people, the real estate is treated as inventory, rather than capital assets, and the profits on the sale of those properties is treated as ordinary income, subject to the self-employment tax. You report on a schedule C if you are a sole proprietor. Like @abctax55 said, "depends on the facts/circumstances"