HELP! Tax question on sale of L/O/rehab - Posted by KatieFL

Posted by KatieFL on April 10, 2001 at 18:47:55:

Well, for those of you that I met, I still haven’t sold my rehab. I actually had another contract signed and the buyer backed out 2 days later. My question is about taxes.

I’ve had this property under l/o for the last 18 months. We did all the repairs in 2000. I am hoping to sell it soon and at this point I am just trying to break even (holding costs ate the profit away, even though we did have it rented out for 8 months).

To avoid lenders problems with financing my buyer, I have an arrangement with the seller (who is a very good trusted friend) to do the closing directly between the seller and my buyer and he will pay me my profit at closing.

The big question is: can I deduct my expenses from last year against the profit on this rehab? I am getting 19K cash at closing, so I’d have to pay 1/3 of it in taxes for this year, but I really did not make any money on it - I’m just breaking even. I am doing my taxes today for 2000, and I don’t have anything to deduct those costs from for 2000 either. Please help me figure out how not to have to pay taxes on money that I have not made!

Thank you.