Before the real estate crash, a growing number of people were "flipping" houses.
The process involved buying (and mortgaging) a dilapidated residence at depressed prices, engaging various trade contractors to perform restoration, then selling the finished product for a good profit in a strong housing market. Often the "flipper" didn't have to do as much as pick up a hammer to achieve this easy profit, although if he had any skills to do any work himself he could add to the profit. The "key" was finding a house in such needy condition that the mass of buyers wouldn't want to buy it and go to the trouble to make it worthy of their living expectations. And these houses clearly exist almost everywhere.
One client did this and I claimed the profit on Sch D since the process took well over a year. As we took LTCG, he had three more such houses mortgaged, and I told him we were going to have to report on a Sch C in the future. Then he moved 300 miles away, used another preparer, but still made local contacts and many trips driving to get the work done.
As fate would have it, now he has moved BACK here. During the years that transpired, he sold one more house at a profit before the crash, and was then stuck with a couple houses that wouldn't move. In 2009, he had to sell these two at whopping losses, and I'm expecting to see 1099-Cs when he comes. And of course, none of these were his personal residence.
I believe Sch C is as appropriate now as it was before the crash. Working three ongoing house jobs is hardly an "investment". Of course, Sch C is now to his advantage, since the jobs are now at a loss and not limited to $3000/yr. And, of course, the cost of these homes will have to be adjusted downward if any 1099-Cs apply.
Does this sound like Sch D or Sch C to the readers? By the way, "flipping" has dramatically lost its appeal.
The process involved buying (and mortgaging) a dilapidated residence at depressed prices, engaging various trade contractors to perform restoration, then selling the finished product for a good profit in a strong housing market. Often the "flipper" didn't have to do as much as pick up a hammer to achieve this easy profit, although if he had any skills to do any work himself he could add to the profit. The "key" was finding a house in such needy condition that the mass of buyers wouldn't want to buy it and go to the trouble to make it worthy of their living expectations. And these houses clearly exist almost everywhere.
One client did this and I claimed the profit on Sch D since the process took well over a year. As we took LTCG, he had three more such houses mortgaged, and I told him we were going to have to report on a Sch C in the future. Then he moved 300 miles away, used another preparer, but still made local contacts and many trips driving to get the work done.
As fate would have it, now he has moved BACK here. During the years that transpired, he sold one more house at a profit before the crash, and was then stuck with a couple houses that wouldn't move. In 2009, he had to sell these two at whopping losses, and I'm expecting to see 1099-Cs when he comes. And of course, none of these were his personal residence.
I believe Sch C is as appropriate now as it was before the crash. Working three ongoing house jobs is hardly an "investment". Of course, Sch C is now to his advantage, since the jobs are now at a loss and not limited to $3000/yr. And, of course, the cost of these homes will have to be adjusted downward if any 1099-Cs apply.
Does this sound like Sch D or Sch C to the readers? By the way, "flipping" has dramatically lost its appeal.
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