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Is the LLC in the business of buying and flipping real estate? Or are they in some other business?
If their business is refurbishing houses and reselling them then treating them as COGS is correct
Yes. the llc is in the business of buying and flipping real estate.
Then yes, the treatment is correct
how to present it on K1
It would be reflected on the K-1 the same way as any other regular income and expense items are handled
It would be the same if they sold shirts
ok. so it is not anything related to capital gain/loss
nope. this is inventory
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Thanks so much!
One of the partner's CPA has another view of this. The CPA suggested that since they flipped the property, he thinks this property is not an inventory but an investment. So he suggested to amend the tax returns; because, if it counts as investment then it's not revenue but capital gain. So the partners can save on self-employment tax.
My questions are
1. should this property be recognized as an inventory or an investment?
2. If it's an inventory, can the gain from the sale of this property count as capital gain, even though it was recorded as inventory?
3. if it can be treated as investment, does the company need to amend their tax return from the 3 years?
4. Will amending the returns result in a greater chance for an audit?
Thank you for your reply.
I am wondering if you can review my tax return on some specific parts. Are you able to do that?
Not post online. Of cause.
Thank you anyway.