I have a client that is buying properties and then selling the properties the same day using a contract for deed for the sale. Apparently, these sales are high risk and there is a good chance he will get the properties back due to default of the contract. All the contracts are sold at a loss. He receives interest income and has some expenses relating to these activities. Next year in 2008 he going to have several contracts for deeds on new properties. I initially thought schedule D investment activities, but since he several at a loss and the potential to get the properties back because of default, I am not sure. He wants to put it on a C as a business,loss this year around -21,000. I am not sure because of it being a passive activity, potential for a profit unlikely. I have not seen any Contracts for Deeds before and I am not positive of the correct way to handle this. Also, since the contracts are high risk are they really considered a sales until the final payment? Could this be considered a business?
Any help I really appreciate. Thanks JoeW
Any help I really appreciate. Thanks JoeW