Splitting Profits on a Flip

[Lacie Gilbert]

My mom and I are buying a house to flip. She will put up the money for the house and rehab. I'll be doing all the work. We're going to split the profits 50/50. This is my only job and will likely be my only reported income for 2019. How do we report that she paid me half of the profit on tax returns so that she doesn't get taxed again for profit that wasn't actually income for her? 

[Eamonn McElroy]

@Lacie Gilbert

You should document how you intend to split profit and loss.  At that point you have a general partnership and 1065 obligation.

If you're doing that, it may be advantageous to take it one step further, form an LLC and write your mother into the operating agreement as the functional equivalent of a limited partner. At that point you've structured the transaction so she avoids SE tax. Conference call your attorney and CPA....