Flipping houses

[LawrenceGR]

Intent

I think it all hae to do with the intentions of the people buying the house. If the only reason they bought the house was to fix it up to sell then it would be a business. If they bought to live in while thry were fixing iy up then it would be personal home excluded from capital gain or business income. This could be like many things in tax: Open to interpretation.

[jainen]

we glare at each other

>>fixing up his personal investment property and not in the business of fixing-up<<

Well, OJ, this is where we glare at each other. It seems to me that if he is doing something to make money, then he is doing it to make money. An investment makes money (hopefully) on its own, with only minimal "doing" or management activity.

An investment is property; a business is activity. Of course, not all property is investment. It could be business-use, which means it is used to produce a business product or service. Or it could be business inventory if it is the actual product that will be sold, whether previously purchased or created or a combination of purchase and create. Property can also be for personal use only.

Similarly, not all activity constitutes a business. That's what Line 21 is for -- income derived from a non-business activity. The "facts and circumstances" you mention relate to whether the income is a result of the property's value changing because of external market forces (the key fact in investment), or because it acquires added value from new modifications or construction.

[OldJack]

I think it all has to do with the intentions of the people buying the house. If the only reason they bought the house was to fix it up to sell then it would be a business. If they bought to live in while fixing it up then it would be personal home excluded from capital gain or business income. This could be like many things in tax: Open to interpretation.

I agree that intent is a factor in the facts and circumstances issue to determine a business activity. However, the fact that the owner intends to fix-up and sell does not in itself make him operating a business. Such intent, if defined as being in business, would put the owner in business from buying most anything that he expects to ultimate sell, such as his personal automobile, camper, etc. The real question is does the owner think or intend to be in business. That is the owners decision, it is not appropriate for a tax preparer to simply declare that the owner is in business if the owner thinks otherwise.

[OldJack]

Well, OJ, this is where we glare at each other.

Well jainen... you would be the loser in that contest as you couldn't glare very long as I am not very good to look at. Here is my picture for you to glare. Hope it doesn't hurt.

[Davc]

Well jainen... you would be the loser in that contest as you couldn't glare very long as I am not very good to look at. Here is my picture for you to glare. Hope it doesn't hurt.

You're a lawyer?

[OldJack]

You're a lawyer?

Nope... just an Ozark hillbilly jackass. Are you looking for a lawyer? I don't think there are any around here, but there may be. All lawyers stand up!