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Flipping House: How To Tax?

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Level 1

How do you report the sale of flipping houses on Form 1040? Schedule C or Schedule D (Form 4797, Sales of Business Property).

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7 Replies 7
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Level 15

Depends on the facts/circumstances..

Give some more info/details & we'll form an opinion.

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Level 11
Level 11

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"

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Level 1

The client has ordinary income from a business which reports the activity on a Schedule C. Now, this client also flips one or two houses per year as well. The majority of the income he received is from the Schedule C Business.

 

 

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Level 15

Nature of the "other" business?

And one/two a year for how many years?

(BTW, you aren't charged by the word here - gives us more details)

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Level 1

The other business is a math tutoring center which he's owned since 2011 and he's been flipping houses for two years now.

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Level 15

IMHO - a couple a year, and for a couple of years is a business & goes on Sch C.  With SE tax...

Former Chump... umm.... AllStar.
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Level 13

People can have more than one Sched C. You have unrelated activities, and you described that this person has regular and ongoing property flipping as a business. That means there should have been this second Sched C for every year he flips.

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