When would long term gains be taxed as self employment income?

[Chad C.]

I currently work full time, and I have 10 properties that I have installment sales on, and they will be taxed using long term gains. I got the impression from my CPA that if I was to reduce my employed hours enough(or quit), that the installment sales would be taxed at self employment income rates. I asked where the line was, and he said I need about 60% full time employed to use long term gains? Any input or clarification?  Is this just following the 50% rule of real estate professional status guidelines?

I am trying to figure out if I can reduce my employed hours, keep my income low, less than 40ishk and get in 0% capital gains bracket. Or make 60-80k in rental income (from other regular rental properties)and depreciate enough to show less than 40k. Then pay 0% tax on those 10 properties.

I have been trying to figure out how to obtain REP status to pas losses on, but maybe I want to avoid it so I don’t have to pay self employment tax. it seems that there may be a sweet spot, or efficiency spot, while I transfer to full REP status.

[Ashish Acharya]

Originally posted by @Chad C.:

I currently work full time, and I have 10 properties that I have installment sales on, and they will be taxed using long term gains. I got the impression from my CPA that if I was to reduce my employed hours enough(or quit), that the installment sales would be taxed at self employment income rates. I asked where the line was, and he said I need about 60% full time employed to use long term gains? Any input or clarification?  Is this just following the 50% rule of real estate professional status guidelines?

I am trying to figure out if I can reduce my employed hours, keep my income low, less than 40ishk and get in 0% capital gains bracket. Or make 60-80k in rental income (from other regular rental properties)and depreciate enough to show less than 40k. Then pay 0% tax on those 10 properties.

I have been trying to figure out how to obtain REP status to pas losses on, but maybe I want to avoid it so I don’t have to pay self employment tax. it seems that there may be a sweet spot, or efficiency spot, while I transfer to full REP status.

If the sale has already happened, they will never be self-employed income. 

Also, the self-employment income would never be reported as installment sale.

I think what your CPA might be saying is if you start selling new properties as flipper/dealer, you new income will be subject to SE taxes.