What would be the NAICS code for a Real Estate Investor

Question

I am an LLC here in Texas and have to file a franchise tax accountability questionnaire, does anyone know the NAICS code for real estate investing?

Mike Walker · Answer

Investing is classified under different activities (dealing vs investing), per IRS regs. Capital Gains are taxed very differently, based on the sale or disposition of the inventory / asset.

Construction/Remodeling for a quick sale is dealing. Building or Remodeling to hold and lease is investing. The intent is what the IRS looks at when classifying the activity. Bankers usually want to know the primary NAICS/SIC for a commercial checking account.

CONSTRUCTION

NAICS 236117 - Residential New Spec Home Builder / Investor  (Former SIC 1531 Operative/Merchant Builder)

NAICS 236118 - Residential Remodeler / House Flipper / Investor  (Former SIC 1531 Operative/Merchant Builder)

LEASING

NAICS 531110 - Residential Holding / Rehab & Holding/Leasing for 12 months minimum (or more)

NAICS 531120 - Commercial Holding / Rehab & Holding/Leasing Building Landlord (non-mini storage)

OTHER ACTIVITIES RELATED TO REAL ESTATE

Wholesaling could arguably fall under the following extended SIC Codes

SIC 6531054 - Real Estate Buyers Representatives  (wholesaler/non-licensed)

SIC 6531026 - House Buyers  (wholesaler/non-licensed)

http://siccode.com/en/siccodes/6531/real-estate-ag...

These are cross-referenced with NAICS 531390

John Brian · Answer

Thank you for the info. Is there a different code for wholesaling property or flipping?

Mike Walker · Answer

James,

I think you're talking about rolling the profits (gains) from one property to another, using the 1031 Tax Deferred Exchange (still valid after the recent Tax Cuts & Jobs Act was approved on 12/22/17), provided under the IRC Code Section 1031. You can read more at the following link >

https://www.irs.gov/newsroom/like-kind-exchanges-u...

As far as the NAICS or SIC Code you adopt when you file, you want to choose the  primary activity you're engaged in (Construction, Leasing, Wholesaling, etc), so the return reflects revenues & expenses that can be compared to similar returns that are filed, doing the same type of activity. Although this may not be a big deal to you, the IRS can and does compare claimed expenses between businesses engaged in the same type of activity. This becomes especially relevant if a deduction is claimed then is disallowed because the deduction appears to be unsubstantiated. Here's a link to IRS Pub 535 >

https://www.irs.gov/publications/p535

Although no one is thrilled about paying taxes, the IRS website has plenty of solid information to read, so that a business owner or investor can stay in compliance with the tax laws and make them work advantageously. Planning is key. A good tax attorney or CPA who works with investors and/or small businesses can help you make the most of your filing and the deductions claimed.

Chris Martin · Answer

http://www.census.gov/cgi-bin/sssd/naics/naicsrch

531110 is common for most residential rental property. "531110 Lessors of Residential Buildings and Dwellings"

That is what we use in NC and SC and probably good for all states...

2002                NAICS

2007                NAICS

2012                NAICS

Corresponding Index                      Entries

531110

Apartment building rental or leasing

531110

Apartment hotel rental or leasing

531110

Apartment rental or leasing

531110

Building, apartment, rental or leasing

531110

Building, residential, rental or leasing

531110

Cottage rental or leasing

531110

Duplex houses (i.e., single family) rental or leasing

531110

Dwelling rental or leasing

525930

531110

Equity real estate investment trusts (REITs), primarily leasing residential buildings and dwellings

531110

Houses rental or leasing

531110

Housing authorities operating residential buildings

531110

Lessors of residential buildings and dwellings

531110

Mobile (manufactured) home, on site, rental or leasing

531110

Real estate rental or leasing of residential building

531110

Residential building rental or leasing

531110

Residential hotel rental or leasing

531110

Retirement hotel rental or leasing

531110

Single family house rental or leasing

531110

Town house rental or leasing

Chris Martin · Answer

531390 Other Activities Related to Real Estate seems appropriate. There are no direct NAICS codes related to flipping that I can see.

John Brian · Answer

Thanks! I have also left a message with my CPA and am waiting to here back. But that sounds like it might be the one.

Tammy Coughlin · Answer

Thanks Mike for your information!

What would be the NAICS code for a Real Estate Investor

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