LLC Taxed As S-corp
If you are a LLC taxed as a S-corp, such as myself..
What kind of taxes will i be paying on;
1. Rehab flips >6 months
2. Assignment fees
3. Double Close flips
Any info would greatly be appreciated.
I am seeking a CPA/Tax guy shortly...Just wanted some insight before seeing them.
THX
Ordinary income taxes on the net profits and self-employment income taxes on your income apply at the federal income tax level.
State and local taxes are extra if applicable.
When is the dealer or investor tag given by IRS to an individual ? I am assuming everyone would classify themselves in investor category on their FLIPS, untill IRS says otherwise.
Quote:
On 2006-09-12 17:22, machismo wrote:
When is the dealer or investor tag given by IRS to an individual ? I am assuming everyone would classify themselves in investor category on their FLIPS, untill IRS says otherwise.
At your own peril. And keep in mind the interest and penalties will be harsh. If you continually flip, you will likely be labeled a dealer and you should pay the proper taxes. Even if you are doing this through an LLC, the penalties will NOT be deductible.
thanks everyone great info. I am just wondering how many ppl on board here still do quick flips, regardless of the huge tax consequences.
can your family medical expenses be deducted as expenses in this type of setup ?
Consider this to avoid dealer classification by IRS
Watch Out For "Quick Turn" Classification
If you are an active real estate investor, you should be aware of what the IRS calls " Quick Turn Investor status." If you also buy and sell real estate on a regular basis, you may be considered a " Quick Turn Investor " in real estate properties. A Quick Turn Investor is one who buys with the intent of reselling rather than for investment.
There is no magic formula for determining who is a regular investor and who is a Quick Turn Investor, but the IRS will balance a number of factors, such as the purpose for which the property was purchased, how long the property was held and how many deals the investor did in relation to other income. If you take option consideration on a "quick turn" property, you cannot defer taxation of option consideration under Section 1234 of the Code.
The best way to avoid “Quick Turn Investor” classification is to form two corporations, one for “turning” properties and the other to invest in properties (rentals).
Remember a corporation is a separate "person" under the law, and therefore, if it is properly organized and managed, it should protect its owners from any personal liability for corporate debts and obligations and from claims against the corporation. Also, the purpose for which the corporation is formed determines the “Quick Turn Investor” status. In other words, you can be both a “Quick Turn Investor” and a Regular Investor at the same time.
see www.instantinc.us - Real Estate Investing from a Tax Point of View
http://www.hud.gov/offices/fheo/lihtcmou.cfm