re: 1 flip with full time job avoid dealer status?

2 Replies

Help me out a bit here. Just trying to get a sense of this.

If I were to flip one house that I bought under my name and sell under my name.
And if I have a regular full time w2 job.

Would that mean that the flip would be considered short term capital gain and taxed at regular ordinary income but that I would not be considered a dealer and - as such - would not have to pay all the self employment taxes involved with that?

I've done some reading and thats what appears to be true based on all the stuff I've seen. But nobody has been explicit in saying if that scenario is true or not.

Any chance @Steven Hamilton II

 can add some insight there?

Paying the ordinary income tax rate is not the issue. Its paying all the self employment taxes on what is clearly not "inventory" as an individual nor is there any intent to do any more of these things any time soon. 

A one time flip, the first one ever, and possibly the last.  And definitely not the full time income of the individual.  My take based on everything I've seen is that it would more than likely not be considered dealer status and therefore not subject to all the SE taxes.

Are there other things I'm missing that would suggest otherwise? 

@Mike H. What was the intent at the time of purchase? Do you have anything that can prove you intended this property to be a buy and hold?

No such evidence. But I guess my understanding was that it didn't matter if I was able to prove the intent as long as the number of properties I flipped did not suggest it was a business activity nor was there a pattern over time that it was a business activity either.

I guess I assumed the same logic in terms of a stock. If I buy a stock with the sole intent to sell it within a month, that doesn't mean it should get taxed as a self employment item. Not unless thats all I do for a living and do it often.

But if I were to buy a single stock and sell it within a month, it would be considered a short term capital gain. Otherwise, almost nothing would be considered a short term capital gain and everything would be self employment tax......

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