Posted by Jimmy on February 23, 2007 at 07:25:10:
a couple of things to consider.
- in the beginning, your transactions can be reported as “capital” in nature. this means you get capital gain or loss treatment. if your holding period is a year or longer, you get the preferred LTCG treatment. Short term gains are taxed at your ordinary income rate, but, importantly, are not subject to employment taxes.
If I understand “wholesaling,” you will be buying properties and then trying to flip them at retail prices, perhaps after doing some rehab work. right? and you would not intend to hold the properties are rentals. right?
if I am right about this, you will quickly enter the realm of “dealer.” this means you are engaged in the busiess of buying and selling properties. capital gain treatment will not be available. the gains and losses woul be reported on Schedule C, and would be fully exposed to employment taxes.
It may be possible to transact these deals in an entity, and thereby sidestep the SE taxes. I’m not sure. Others will know the answer.