Tax Question On A Bump And Carry...
Hello all:
I am wondering what the taxable amount would be for a bump and carry that will be flipped. Details below:
Property appraised for $100k
Purchase price to seller $75k
Loan amount $100k
Total credit back from loan $25k
If this property is to be flipped within a few months, how would you deal with this transaction on your tax return? Would you be taxed on the $100k loan amount or the $75 purchase price?
:-?
2nd part of question, if property is flipped in say 3 month and sold at $99k or $105k how would you deal with the capital loss/gain?
Would you be taxed on the $100k loan amount or the $75 purchase price?
Always purchase price, $75K in this case. Your mortgage loan amount is irrelevant when calculating taxable profit
if property is flipped in say 3 month and sold at $99k or $105k how would you deal with the capital gain?
I would put the money in the bank, keep about half the profit in reserve to pay the taxes, and look for another property to flip with the other half. There is no capital gain here. Instead, there is earned income from your property flipping business. Sell at $105K, you have $30K in earned income taxed at your ordinary income tax rates, AND you also have to pay the social security and medicare taxes on that income (about $4590 on $30K income).
Thank you so much for your quick thorough response.
I've only been on the site 1/2 of a day, and I love it already. I enjoy reading all the valuable info an advice that 's shared. I look forward to learning as well as sharing with others.
Thanks. Glad to be aboard.... :-D