sale of flip house

Forum|Forum|4 years ago
February 10, 2022
2 replies
11 views

client purchased in original house in early 2020. did some imrpovements in 2021. sold at end of 2021. do I separate sales price between short term and long term

Lacerte Tax

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M

mhsmith53

Level 4

I would simply add the 2021 improvements to the basis of the house.

T

twadeAuthor

Level 2

and not show part as ST and rest as LT?

T

TaxGirl3

Level 5

'Flips' are ordinary income/loss, not capital gain/loss (short or long term).

Sale price is revenue. Cost, including improvements, is cost of goods sold.

M

mhsmith53

Level 4

I would say it depends on whether or not Flips is a business (ordinary income) or investment (capital gain)

If the person is regularly involved in flipping houses then it is a business. But if they just boght their first house because they think they could make money on it by fixig it up I would say that is an investment.

Regardless, any improvements are added to basis of the home and treated as a single unit for CG purposes

T

twadeAuthor

Level 2

thanks for the input and we are treating as a single unit for cap gain purposes. client does it as investment.

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