File As "Real Estate Professional"? 1099?
Trying to decide how to file our 2018 taxes. Wife and I retired a couple years, except for the part about working all day, most days. We have a house that is and has been our residence for many years. We also have other active rental property, which we completely DIY except HVAC (including extensive rehabs, for months at a time, as needed, over several years), and more recently, we have an empty 3000 sq. ft. foreclosure about 30 minutes from our residence. Previously we have filed taxes jointly, as retired, with rental property.
Since early January, 2018, we've been doing a rehab of the foreclosure. We worked there all year, more or less full time, except taking two months to work full time to do maintenance and upgrades, between tenants, on another rental, and maybe 8 weeks traveling and visiting family and friends.
My sister came from out of state to visit, and to work. She registered as a business locally, an LLC, and worked as a contractor, giving a written bid and description of work for each job, and an invoice upon completion of each:
- Wallboard in family room, replace and repair as needed. $650.
- Wallboard in rec room, R&R, $450.
- Prime and paint 3 bedrooms, $450.
- Remove texture from bedroom ceiling, skim coat, prime and paint, $250.
- Tear off old roof shingles and load into dump trailer, $600.
- Install walkway of paver bricks, $350.
- Pressure wash non-brick parts of exterior, $300.
- Etc, etc.
So, after maybe five months, we had paid her about $11,000, and she went back home.
Can/should I file as a "real estate professional"? Are there any advantages? Downsides?
Should I send a 1099 to my sister? Under what conditions? It seems if I'm not in business, I shouldn't. But it seems like I'm in business...