This is not an election. If you bought the propert...
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New Member

If an LLC owns a real property for 2 years and then sells it, are the profits deemed "business income" or "capital gains"?

I sold an SFH (Single Family House) owned by my LLC (Single member, Disregarded Entity; NO other income/activity in that LLC) in 2016, for a Gain$. The house was purchased more than a year ago (for repairing and renting out purposes, but never got around to repairing it). In essence, the house was flipped for a gain.

So, If a single-member LLC owns a property for more than a year and then sells it, are the profits deemed "business income" or "capital gains"?
3 Replies
Level 6

If an LLC owns a real property for 2 years and then sells it, are the profits deemed "business income" or "capital gains"?

Unless you are a dealer in real property, profits from the sale of real property are taxed as capital gains (long-term if you have held the property for more a year).

Please read this article for more information:

http://www.snydercohn.com/2012/09/is-it-capital-gain-or-ordinary-income/


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New Member

If an LLC owns a real property for 2 years and then sells it, are the profits deemed "business income" or "capital gains"?

Thank you, TurboTaxMinhT, for your prompt response. I concur. However, Can I "elect" to report it as 'Biz. Income' rather than Cap. Gains (I have my own reasons to elect to do so)? If so, how do I do it in TurboTax? TurboTax currently sees this as Cap Gains; which is, in accordance with the Answer. Thanks.
Level 6

If an LLC owns a real property for 2 years and then sells it, are the profits deemed "business income" or "capital gains"?

This is not an election. If you bought the property with the intent to resell it at a profit, then the gain is taxed as ordinary income (like real estate dealers do).
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