How to record house flipping expenses in partnership

[Hezzidoggo]

Hi there,

My husband and I have a small masonry partnership. We are buying a house this winter and will be selling it in the spring, purely for business income. My question is, for the very large renovation and material expenses we will incur, do we claim those as expenses when we file our return this year? Or do they sit in the books as assets until we sell it? Thanks so much for your help. 

[AmyC]

Yes if this is a flip versus an investment.  It sounds like you are talking about flipping a house. If so, then the house is inventory and all associated expenses will go with the house when it is sold - all claimed at once on the tax return to offset the income. Beware a house flip is considered self-employment income and subject to SE tax. A flip is not the same as an investment/rental house and therefore not subject to more favorable capital gain treatment.

References:

IRS Partnership  

About Publication 583, Starting a Business and Keeping Records