My friends and I bought our first property to flip. All cash if it matters. We put the property in one friend's name (no separate entity yet). The house was bought in Ocotber 2015 and is now complete and on the market. We're sure it won't sell before 2016. My questions:
1. Does this affect our 2015 taxes or must we claim everything in 2016 after it is sold? If it affects 2015 taxes, in what way?
2. How would we go about splitting the costs and profits for tax purposes if we each own an equal share?
in real property transactions irs requires you to "capitalize" your expenses meaning you can't take any improvements to the real property until you sell it. If you are running a flipping business you can take some expenses associated with the flip in 2015 called "current" expenses such as interest, property taxes, and utilities, milage, ect. Bottom line get a good licensed tax professional in your area, not a franchise type, some one with some letters behind their name and preferably own investment real estate themselves. I promise they will save you more in taxes then you will pay in fees.