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Capital Gains Tax
TAX QUESTION!
I am partnering with an individual to do a live in flip. I would live in the house for at least 2 years (to avoid capital gains tax) before selling. My partner would not be living in the house. Will he also avoid capital gains tax?
Most Popular Reply
Flip income ("Real Estate Dealer") is classified as ordinary income and as a result not eligible for the Section 121 Exclusion. The Section 121 Exclusion helps you avoid capital gains taxes.
The IRS classification of income as a "Flip" for Real Estate Dealers is based on a few key factors including "frequency" and "intent".
I don't have all of the details regarding frequency but it sounds like you intend to flip the property when you purchase it. It is likely that both you and your investment partner will need to pay taxes. I said "likely", because I don't have all of the information to make this determination.
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*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.