Is a wholesaler a real estate dealer?

Question

I've been looking online getting ready for tax season, and I'm having trouble identifying if I will be taxed under a real estate dealer. I've wholesaled 30+ transactions this year using assignment contract, wholesale-flipped 4-5(brought and resold as-is) and have 3 under holding currently that I will rent out, one that may be owner financed. will the IRS identify me as a real estate dealer?

I deed everything under my personal name, and a partner. I've done a couple deals within a property trust.

I see the taxes would be a lot higher under a real estate dealing my reason for asking.

I deed everything under my personal name, and a partner. I've done a couple deals within a property trust.

I see the taxes would be a lot higher under a real estate dealing my reason for asking.

Jake Hottenrott · Answer

@Cameron Ellis The IRS does not have a "magic number" of flips to be a dealer.  Based upon tax court cases, there are questions to ask that boils out the true INTENT of the investor which determines if the person is a dealer.  This list is a bit lengthy, so I won't go through it here.  Additional info below:

Per IRS Pub - 334 - Tax Guide for Small Business (Sch C and C-EZ)

"Real estate dealer. You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. Rent you receive from real estate held for sale to customers is subject to SE tax. However, rent you receive from real estate held for speculation or investment is not subject to SE tax."

Also, congrats on getting ready for tax season ahead of time!  Your future CPA will love you!

Dave Toelkes · Answer

@Cameron Ellis

I think Curt is confusing Real Estate Professional status with a dealer to real estate.  Yes, in your situation, you will be deemed a dealer to real estate.  All profits and assignment fees are taxed as ordinary business income and subject to self-employment income taxes.

Curt Davis · Answer

@Cameron Ellis

Put me on the list.

Thanks

Cameron Ellis · Answer

Thanks @Curt Davis I will try to get over this this week..

I took a couple to craig with your company, never heard back from him on the ones I sent over so just limited the list to the guys I've closed deals with before.

Curt Davis · Answer

@Cameron Ellis

If real estate is your full-time career then yes you will be taxed like one I believe.  If your working full time and doing this as well then it would be considered a little different.

If you have assigned that many deals this year you should seek out a local CPA. I as well as many others use Titan CPA in Germantown.  He is very good.

p.s. If you have done 30 some deals why have you not brought any of them my way?!!! :)

Is a wholesaler a real estate dealer?

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