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» From: Columbus, OH Dear TaxMama: A taxpayer buys 3 homes in a year. None are personal residences. The first is rented. The second is sold for a profit. The third is on the market "for sale." The taxpayer is interested in continuing to buy and sell and rent residential homes. However, this is not the taxpayers primary business activity. The primary activity is "store owner" not related at all to real estate. How would you report income from the sale of the home? Schedule D as investment income? Schedule C as ordinary income? Thank you, John Dear John, Unless it was a personal residence rented until a buyer could be found, all rental property is reported on Form 4797 - with the depreciation and other costs taken into account. Real estate held strictly for investment - to buy, fix up and flip, would get reported on Schedule D. After all, it is investment property. There does come a time when these activities might be considered your business. I'm not sure what the threshold is, but it's safe to say that if you buy/sell more than 10 properties a year you'd be considered a dealer. Then, all the activities and profits will be reported on Schedule C, with all the self-employment taxes, etc. If you've got the money to play with all this property, you also have the money to work closely with your own TaxPro. You'd be doing yourself a great disservice if you don't. Best wishes, Eva Rosenberg Your TaxMama  |
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