BRRRR and flip income.

[Caleb Landry]

Hello, Quick question about how the IRS looks at 2 types of income in your company. I have one BRRRR property and now doing a flip on another property. Does the IRS look at the 2 sets of income completely separately? If I use flip proceeds to say buy a roof for the BRRRR or pay down debt would that reduce my tax bill on the flip proceeds? Thank you!

[Ashish Acharya]

Originally posted by @Caleb Landry:

Hello,

Quick question about how the IRS looks at 2 types of income in your company.

I have one BRRRR property and now doing a flip on another property.

Does the IRS look at the 2 sets of income completely separately?

If I use flip proceeds to say buy a roof for the BRRRR or pay down debt would that reduce my tax bill on the flip proceeds?

Thank you!

In addition to what @Paul Allen said, 

Look at this as two steps( does not matter if you have an entity or without entity) 

1st: You will pay tax the profit of the flip. Let’s say 30k. 

2. If you use the proceeds let’s say 10k, from that 30k, for an repair  is you will have 10k of rental expenses. This 10k will decrease your rental income.  10k will not impact your flip profit. 

You will have to pay taxes on entire 30k, even if you use entire amount to fix up rental.