How to Avoid the Dreaded "Dealer" Status When Flipping Houses

Real Estate Investing Real Estate Law
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How to Avoid the Dreaded “Dealer” Status When Flipping Houses

When you get into “selling” scenarios (like wholesaling, retailing, options, lease options), the IRS may try to classify you as a real estate “dealer” as opposed to a real estate “investor.”

Being tagged as a dealer could be a financial disaster for you because (unlike an investor) you are subject to the highest ordinary income tax rates, plus self-employment taxes and possibly other taxes.

I hope you enjoy our latest Blog article:

How to Avoid the Dreaded “Dealer” Status When Flipping Houses

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A for profit activity

If you buy a property with the intent to flip the property(fix it up and resell it on a short term basis) then it is a for profit activity and has to be reported on a schedule C. If you hold it and rent it and or sit on it for long term appreciation it may be considered an investment property. If you buy a property and intend to fix and flip it, it is not eligible for a Sec 1031 like kind non-taxable exchange. Pretty simple.