Posted by Jimmy on April 28, 2006 at 07:35:56:
taxes are an expense of success.
Is this an investment activity for you, or is it a business? Do you have another job? Do you hold any properties for rentals? Do you flip every property you acquire?
If this is your biz, and you buy, rehab and sell every property, you are, or will soon be, a dealer. It’s not a dirty word. It just means you are in an active business, and you are taxed as such. just like a lawyer or accountant or any one else. You don’t get to depreciate your properties, and you don’t get capital gain and loss treatment.
I sell plenty of properties, but I retain a lot more than I sell. My gross rents have increased steadily over the past 6 years, and will continue to do so. Even though I will sell 5-6 properties this year, and 5-6 next year, and 5 last year, it will be difficult for the IRS to classify me as a dealer. Rents are still the main focus of my activities, the properties I have sold were held as rentals for more than a year (some 3-4 years).
The determination of dealer v. investor status is purely factual, and all the facts and circumstances are considered.