How many deals make a Dealer??? - Posted by nate

Posted by ken in sc on July 31, 2001 at 09:03:38:

is a dealer is taxed differently then an investor. An investor pays capital gains tax (20%) and a dealer is taxed at his tax rate. An investor may depreciate the property and exchange, a dealer may not.

How many deals make a Dealer??? - Posted by nate

Posted by nate on July 31, 2001 at 06:46:47:

I heard a very interesting speaker the other night, John Ulmer, at an investment meeting. He uses private funds to buy homes, then sells on contract.
It was brought to our attention, that he is recognized as a dealer… my question is how many deals bring you to this status? I assume it is different in every state, but just curious…
thanks for all of your help!

One - Posted by Dave T

Posted by Dave T on July 31, 2001 at 10:14:48:

As Ken said below, the IRS looks at your intent and your business practice. Each sale is evaluated on its own. It only takes one sale to get the “dealer” tax treatment.

It is a misnomer to call someone a dealer when talking about real estate. The IRS does not tag someone as a “dealer”. Instead the IRS classifies the property sold as either investment property or dealer realty (i.e., inventory). The tax treatment applied is specified in the federal Internal Revenue Code – no state/county jurisdictions are involved here.

Get into the business of selling cars, mobile homes, or other personal property and your local jurisdictions will have “dealer” rules that govern when you are a dealer and when a business license is required.

There is no number… - Posted by ken in sc

Posted by ken in sc on July 31, 2001 at 07:45:55:

The IRS does not have a number, although I have heard people say so. The IRS looks at your INTENT when you purchased the property. If you intended to sell, the property is dealer property. If you intended to invest (rent), then the property is investment property. One person could have both types of property.

This is why most investors who have both separate them by ownership. My corp buys and sells, and is thus a dealer. I personally buy to invest (rent).

If you are just starting out, you could probably get away with about anything if you only did one or two deals a year. I know I did! But when you truly get in to business, you will need to set things up correctly.

Hope this helps.


Re: There is no number… - Posted by Eric Jessen

Posted by Eric Jessen on July 31, 2001 at 08:23:42:

I am a complete novice in REI…so sorry for the dumb question: For the IRS, “what is” and “why is” there a difference between a DEALER and an INVESTOR? Do these designations have a distinction?