Real estate agent buying a property, renovating and selling it — tax implications??
Here’s the details – - real estate agent buys a residence. He/she pays for repairs and improves the property. Then he/she sells it for a gain/profit.
Tax implications? Isn’t there a rule out there regarding an real estate professional conducting a “business” in which he/she flips houses. Hope my details are not confusing.
This is a pretty complex question and would be difficult to answer here. Charlie and Angie G gave about as good and clear an answer as you can hope for.
I have heard of special rules for real estate developers, so I’ll add something here about that…
Real estate developers are:
1) People who spend more than 750 hours per year working at developing real estate
2) People with 50% or more of income from services derived from real estate development
3) Material participation is required (you can’t pay someone else to do it and then call yourself a developer)
This is how you define whether you are in the business of being a real estate developer. These rules apply to people who want to claim losses against their income and don’t want to be trapped in the rules regarding “passive income”. Rules #1/2 include these activities: development, construction, acquisition, conversion, rental, operations, management, brokerage, and leasing.
I would suggest to real estate agents who wish to be “flippers” set up a seperate LLC to handle that activity. Then the LLC can be the developer, and the agent can go about whatever other activity they want.
The Spot James Owen
