Posted by Todd W(CO) on August 05, 2001 at 23:09:51:
-“The more you flip, the more you appear to be a dealer. If your intent is to quickly sell your properties that you just bought then your taxable gain will be treated as ordinary income and not as a capital gain.”
My question is which way would be least beneficial, a capital gain, or taxes paid on normal income? Why would someone want(or not want) to be taxed in one catagory or the other? please explain
Thanks for your time
Todd Williamson(CO)
For flip property, the tax burden is the same as your marginal tax rate. Because your net profits are taxed as ordinary income, many seasoned investors will form a corporation to do their deals. The corporate tax rate on the first 50K of net profit is only 15%. If your marginal tax bracket is higher, then a corporation may be the best tax savings strategy for your flips.
We all hate to pay taxes, but if you make a lot of money it is a necessity. My tax burden this year is going to be a hefty one, but that means that I made money.
I would look at your taxes as a cost of doing business, realistically it is. I’m not in a postion to give you a whole lot of tax advice, but I would suggest first learning how to make money, then seeking guidance on how to save on taxes.
I had a partner who was more concerned on how to beat the government then on how to make money. All the tax saving strategies in the world will not help someone who doesn’t make enough income to take advantage of it.
Make the money, then seek the counsel of competant tax strategists. They will be well worth the money.
Re: Flipping properties and taxes - Posted by phil fernandez
Posted by phil fernandez on August 05, 2001 at 19:45:40:
The more you flip, the more you appear to be a dealer. If your intent is to quickly sell your properties that you just bought then your taxable gain will be treated as ordinary income and not as a capital gain.
Where you can get nailed on taxes is when you are flipping properties taking back paper to move them. You will be taxed on the entire gain even though you have not received a lot of cash at closing and have a note. Been there, done it . When you do your taxes you would have to write a check for taxes on income not received yet.