Re: DEALER not an INVESTOR - Posted by Tom-FL
Posted by Tom-FL on October 13, 2003 at 24:11:05:
Well, the news is not good. There are articles about it in the How-To section as well as many threads in the archives. Search on “dealer”.
Now, here’s my take:
The rules are not clear by any means. You get tagged as a dealer after you flip a “certain amount” of properties. What is the the “certain amount”? Ever play “Pin the tail on the donkey”? You are considered a business and your houses are considered inventory. You don’t get to take any of the investor passive income breaks available to landlords.
I would think you could explain away one or maybe two flips as “getting lucky”. Then I’d seriously consider getting a corp to take the hit.
Now to question two, once the IRS decides you are a dealer, they will be watching you, and it’s very difficult to escape dealer status. Any houses you start claiming depreciation and cap gains treatment will be considered to be “inventory you couldn’t sell”.
Dealer status is alot like falling into a big hole. Once you fall in, it’s a bear to claw your way back out. Obviously they will not be eager to grant you a status that results in less revenue for them.