Lonnie Taxes - Posted by John Katitus

Posted by JHyre in Ohio on December 18, 1998 at 06:21:16:

I hate to be the bearer of bad news, BUT Lonnie is right. You are 99.9% likely to be a dealer for IRS purposes. As such:

  1. You pay ordinary income tax rates, NOT capital gains rates
  2. You may not use installment sale method
  3. You may not deprecaite your mobile homes even if you end up holding one for over year (NOT likely in your case!)

Mr. Bronchick’s advice- to use a corporation to flip mobile homes- is on the mark. While you are eventually double-taxed, the present value of reinvesting after only 15% taxation is very high given your dealer status. In addition, the corporation avoids the bulk of the self-employment/FICA tax. I ran a few spreadsheets to confirm this advice and was unable to find a better way.

Ohio has some VERY monopolistic motor vehicle dealer laws. Call me if you’d like to discuss them.

Regards & Way To Go!

J. Hyre

Lonnie Taxes - Posted by John Katitus

Posted by John Katitus on December 18, 1998 at 02:14:02:

As I have finally bought my first two MH’s and am preparing to sell them, it’s time to think about income tax. In a standard Lonnie deal (buying for cash and selling with financing), he says that he pays all the Fed tax when he sells, as if it was not an installment sale.

Is this right? Are MH’s, since they are titled like vehicles, not handled as installment sales are for real estate? Thanks again.