As the title suggests, I need help discovering a current answer to my forth coming tax issues and how to plan accordingly. I found some stuff among the 556 pages in this particular forum thread but it's all older. I have 2 scenarios I am currently facing that I would love your help with and hopefully it helps someones else with similar questions.
Back Ground: Full-Time Military Officer and Occasional RE Investor.
Interests: Fix & Flip and Buy & Hold
Location: Out of State Investor. Looking in North Georgia/ South SC
Story #1: I am currently involved in a single-family fix & flip. I am ONLY involved in this deals as a financier. The arrangement is in exchange for an equity split of the profit upon sale of the property. Again, I am in no way party to the property itself, the rehab process, mortgage, etc. Only a money investment. The Investment amount was secured through a lender (Non- Hard Money). In order to plan accordingly, I need to know will I be taxed on my portion of the total profit split ($70k) OR on my realized profit after the original loan ($50k) is repaid and the amount I NET ($20k) is settled. Thanks in advance!!!
Story #2: I am currently pursuing a Fix & Flip opportunity in which I will either be the sole player via mortgage through a lender or possibly bring in a partner to finance either the rehab or the down payment. In this instance, since I am not full-time and will finance the project (Mortgage or Loan or both), which type of tax implications should I plan on and on what amount should I expect it to be applied. Total Sale Amount, Net proceeds after original loan payoff, etc.
Avoiding Taxes: Can I help my second situation by holding the property after the rehab, putting a tenant in, and selling after 12 months? Flipping as planned and rolling proceeds into a 1031, Opportunity Zone, or Self-Directed IRA?
Story #1. I am providing only money towards the project. That money is a personal loan. How will I be taxed and on what amount?
Story #2. I am purchasing a property. Using a renovation loan or mortgage. What tax will I be held to and what amount will be taxed?
You all are awesome and I hope these two instances help others who might be wondering. Thanks So Much!
You need an accountant and a lawyer....period. Sounds like you are doing these in your personal name and not business entities. You need professional advice. Now.
1# amount given back is likely a return of capital. Does the $20,000 of the $70,000 a return of capital?
@Basit Siddiqi yes. Scenario 1, The $20k is the return of capital. Initial in is $50k.