Hypothetical Tax question on Flips - Posted by Tom
Posted by Tom on December 08, 1999 at 18:23:13:
Ok, Heres the senario.
Two investors that partner on deals flip properties to each other to pull cash out at closing.
They find a property worth $65,000. And they can buy it for $30,000.
Investor one puts a contract on it to buy it for cash from the original seller for the $30,000.
Then turns around and gives investor two a contract for $65,000. Investor Two gets an 80% LTV with 20% down.
They go to close, investor one gets a check for $35,000. He gives investor two back his 20% down payment of $13,000. Plus they split the additional profit of $22,000 to the tune of $11,000. each.
So the question is, Investor one has given back a total of $24,000. Is there any way that investor one can write this off so he is not taxed on it? Or is he going to get wacked?