transitioning from dealer to investor

[David Lunsford]

After speaking to CPA's, the tax attorney and real estate attorney it's clear I cannot run a dealer business out of one entitiy and create installment sales in another entity without running into problems with the IRS. Am I going to have to shut down my dealer business for an entire year, then start a new company that does nothing but installment sales and even then if I do more than a couple of these per year will the IRS want to classify these as dealer transactions. Any thoughts would be appreciated

[Bill Gulley]

Charles, I see this as him being a dealer in an active capacity and opening another business entity to acquire the inventory to sell in his active dealer status, as a sham transaction. The reason for a cooling off period.

If you form a new LLC, buy and hold the properties you might justify the investor status, holding the properties for more than one year. Your two entities need to be seperated, no co-mingling of assets.

I had a similar problem financing real estate and owning it. But the two activities were different enough to justify the business side from my investments.
Like CHarles mentioned, more details. Charles will have a better view on this than I. Good luck, Bill