What is considered dealer status - Posted by David Krejci

Posted by David Alexander on January 24, 2000 at 11:07:06:

Now if you could get this this signed by some higher up IRS agent.

David Alexander

What is considered dealer status - Posted by David Krejci

Posted by David Krejci on January 23, 2000 at 15:25:24:

If I buy a property, fix it up and re-sell it on a contract for deed for my equity, and do this several times during the course of the year, am I going to be considered a dealer in the eyes of IRC. Thank you

For what it’s worth… - Posted by Kim K–AZ

Posted by Kim K–AZ on January 23, 2000 at 22:55:57:

Through the I.R.S. web site I posed this question:
Please define the paramaters that would differentiate my real estate activities between me being declared a real estate investor or a real estate dealer as the tax implications vary dramatically.
The I.R.S. reply:
A real estate dealer would be reporting both income and expenses on a schedule C,with net income subject to self employment tax. Presumably a dealer would be aiding in buying and selling properties for other people, not for himself.
A real estate investor would be purchasing and selling on his own behalf, with the net gains being capital gains or rental income, not subject to social security tax. Publication 550 on our web site discusses investment issues.
I couldn’t have said it better(or more vaguely)myself. I guess we classify ourselves at our own peril.

Re: What is considered dealer status - Posted by Dave T

Posted by Dave T on January 23, 2000 at 22:50:46:

The facts and circumstances of each situation must be analyzed to determine whether a taxpayer is a dealer as opposed to an investor. The status is decided on a property-by-property basis and not on an individual-by-individual basis. There are several “tests” the courts use to decide the dealer vs investor status for a given property.

In your scenario, you are buying and rehabbing property to resell for profit. Your property is then held primarily for sale to customers and not for investment use.

The courts have traditionally ruled that property held primarily for sale is not eligible for the more favorable capital gains treatment, 1031 exchange treatment, and depreciation deduction – and therefore is “dealer” property. As such, your full profit is taxed as ordinary income in the year of sale.

Whatever the Internal Revenue Committee decides on that particular day… - Posted by Chris (FL)

Posted by Chris (FL) on January 23, 2000 at 21:48:12:

From what I understand , IRS is a rather arbitrary racket … I mean , “service”.

Talk to a competent CPA that understands what you want to do. You might want to form a corp.