Capital Gains and Losses

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I have a single member LLC that purchases, rehabs, and sells…

Customer Question
I have a single member...
I have a single member LLC that purchases, rehabs, and sells real estate. All properties sold last year were held less than 1 year. Should I report them on Schedule D or treat as ordinary income (entering proceeds as income and using the COGS calculation for the basis) on Schedule C? If I put them on Schedule D, the LLC will produce a loss.
Submitted: 2 years ago.Category: Capital Gains and Losses
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Answered in 9 hours by:
3/16/2016
Tax Expert: TaxRobin, Tax Preparer replied 2 years ago
TaxRobin
TaxRobin, Tax Preparer
Category: Capital Gains and Losses
Satisfied Customers: 18,044
Experience: 15+ years in Tax preparartion as well as Instructor for tax law, theory, and application
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Hello

Real estate dealers buy and sell real estate as part of their everyday business. Real estate professionals who are involved in “flipping” (i.e. buying real estate with the intention of selling it for a profit in a short time frame) are usually considered dealers.

When real estate dealers sell their properties, those properties are considered inventory and any gains are taxed at the dealers’ ordinary income tax rates.

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Customer reply replied 2 years ago
skip the Schedule D and complete everything on Schedule C?
Tax Expert: TaxRobin, Tax Preparer replied 2 years ago

All your costs, acquisition, rehab, holding, re-sell all add and make up your total basis. That figure subtracted from the sale price is the remaining profit which is reported on your schedule C.

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Customer reply replied 2 years ago
I guess, technically, it doesn't matter? If I did a Schedule D, it will show as short-term capital gain on 1040 and will be taxed at ordinary rates as well. I think last year, my tax guy put the sale on Schedule D (he was hired by my now ex-husband so I'm not using him this year!!) since I had a personal sale of a rental property. I just don't want the LLC to show a loss again! Also, don't want an audit trigger!!
Tax Expert: TaxRobin, Tax Preparer replied 2 years ago

The rates will be the same because short term is ordinary rate for tax.

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Customer reply replied 2 years ago
I haven't had enough coffee yet this morning, LOL! Just so I'm tracking, list the sale proceeds as income in Part 1 of Sch C and put the basis in the COGS calculation in Part 3...all other costs/expenses not directly related (liability insurance for the business, supplies, etc) in Part 2.
Tax Expert: TaxRobin, Tax Preparer replied 2 years ago

You are buying and selling property just like a store buys and sells items. You have to report this on Schedule C.

The sales go on the C as Gross. The basis is the cost to purchase plus the rehab costs.

All other business costs on the schedule C in their appropriate line (insurance, office supplies,...)

Yes

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