House Flipping

[campbell1654]

I am working on a return where my client, with another person, bought a house, fixed it up and resold the next year (2018). The received a 1099-S. I am trying to figure out how to report this. Do I set it up on a schedule C? Although it's a real estate sale, it's not their personal residence. I tried to enter in my program as a real estate investment, but I don't see where to enter the expenses. As I'm typing this, I'm thinking Schedule C is were I need to go. Can someone confirm or direct me somewhere else? Thanks!

[ATSMAN]

I think you may have to file a partnership return if two separate people (not spouses) are doing this together and splitting the cost and revenue. The house that they are flipping is stock in trade if this is what they are planning to do and not just one off investment sale.

[JohnH]

They probably will have to file a partnership return, depending upon how the house was titled and whose name was on the settlement statement. A single residence can probably be treated as an investment, but if they continue doing this, it likely would need to be treated as a business. (Lots of people decide flipping isn't the way to easy money they expected and wind up never buying even that second property, much less any others)

[ATSMAN]

I am just not comfortable doing House Flipper's tax returns so I end up declining 99% of those engagements. Something about that line of work that just does not seem to work the way other small business returns do.

[Burke]

I treat it as a Sche C item (or partnership in this case). They had an intent to make a profit, kept it less than a year, never lived in it and fixed it up with the intention of making a profit. That is the key to deciding how to treat it. Whether they do it again or not.