Grove City, OH · Member since 2016 · 167 posts · 66 votes
9y
you may want to provide a few more specifics but assuming you mean you bought a house improved it, and sold it all in the same 12 months and not through a company.... then yes the gain is taxed as 'Active' income and is treated similar to w2 income for tax purposes. this rate will be higher then say, rental income which is passive.
Real Estate Broker · Cleveland, OH · Member since 2012 · 771 posts · 252 votes
9y
If you resell the property within one year of acquiring it, your gain will be treated as a short term capital gain. It's taxed at the same rate as your ordinary income, instead of the lower capital gains tax rates. Also, it's deemed to be earned income instead of a passive investment so you'll also be subject to ~15% self employment tax in addition to the income tax. These tax implications are not referred to as a "penalty", but I wouldn't blame someone for coming to that conclusion.