Dealer vs. investor for tax filings?

2 Replies

Hey, So I flip homes and have rentals. Question is should my tax returns for my LLC file me as a dealer or investor? Real estate is not my primary source of income and I do not do any of the work myself. I simply find and finance the properties and assist in sourcing the remodel to sub contractors. My 2017 tax returns were just filed and I was filed as a dealer, but another accountant states I should’ve been filed as an investor. He also states that I should not amend the return because it will likely trigger an audit. Can anyone provide any insight?

Flipping homes that rises to the level of a trade or business is subject to ordinary income tax rates, and the flipped homes are treated as inventory, so that portion of your business can be considered a "dealer".

Rental real estate is not, however. I would seek the counsel of a CPA who can advise you correctly.

@Mayer M. , from what you mentioned, looks like you are a dealer.  I agree with @Lance Lvovsky

If you were just a money partner and invested in the partnership as a limited partner, you would be an investor. Here you are finding and financing. Also so managing the subs.  Is this you SMLLC ? or are you a managing member of MMLLC? In both cases, you are not considered an investor.