Help…About to buy a flip with a friend, 50/50 split of profit. He is going to buy it as his personal property with the intent of selling it 6 months after purchasing. If he sells it in his name ( pays short term capital gains or applies for the 2/5 year exclusion), is there a way to lower the taxes on our profit? Can we claim we made a “salary”, but isn’t that the same tax rate we already pay? How do we lower the tax rate on our profit he cuts us?
You must hold your main home for a period of 2 years or longer to qualify for the Section 121 exclusion. Refer to IRS Publication 523 for complete eligibility requirements. No, you can’t claim your capital gain income as salary since all income must be reported on the corresponding tax schedule. Talk to a CPA that specializes in real estate to get correct advice on how to lower your tax rate legally (while keeping you out of trouble with Uncle Sam).
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