Colorado tax on Flip through LLC

[Matthew Schlottman]

Weird question that will probably require a CPA but wanted to see what people had to say first. Through an LLC a partner and myself flipped a condo in Colorado this year. He lives in Colorado, but I do not. Since I'm an out of state investor what colorado state taxes should I be on the hook for? I'm aware of a 2% tax on the sale price for out of state investors... does that apply here, if so do I pay 2% on the whole sale price still or just 50% of it?

[Teri Feeney Styers]

@Matthew Schlottman generally in Colorado taxes are withheld at closing by the title company for out of state sellers and is forwarded to the Colorado Department of Revenue. You need to look through your closing documents to see if this occurred. However, if your LLC is a Colorado LLC then this may not have happened. I am not a CPA - but the IRS treats income from flipping as ordinary income (not capital gains). Your LLC will file federal tax forms and whatever profits were made will pass through to the partners most likely via a K-1 form. You will pay based on your ownership percentage as a partner. If your LLC is Colorado based then it will file a Colorado form too (DR106) and again the income will pass through to the partners. The partners will file personal Colorado income tax forms for income earned in Colorado. There is a special form called a 104PN used to declare income earned in the state. At that point, if taxes were withheld at closing, you will be able to document the taxes that were already paid and what you owe or are due as a refund.