Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
speedway121
Level 2

1099-S Received for flipping property

Escrow gave me a 1099S for this property.

Lets say the 1099S is for 280k

My cost basis for this was around the same. 

 

I have a Schedule C for my other real estate activities.

Can I report this on my Schedule C?

It looks like it NEEDS to be on Schedule D?? 

6 Replies
ColeenD3
Expert Alumni

1099-S Received for flipping property

Please see this answer from HalAl:

 

It depends on what activity you are doing as the taxation of "flipping" houses depends on how you are doing it.  Examples:

  • If you purchase one house and "flip" it for a profit, it is a capital gain.  If sold in one year or less, it would be a short term gain.  If sold after being held for more than one year it would be a long term capital gain and would be entitled to favorable capital gains rate treatment.
  • If you purchase multiple houses and "flip" them for a profit (i.e. you are actively engaged in buying and selling houses) you may be engaged in a business.  If you are, you lose the favorable capital gains rates and must pay self-employment tax on any profit.  Bad news:  the IRS has no specific criteria as to how many houses or how often you need to sell them to lose capital gains treatment.
  • If you purchase houses, rehab or clean them up and then resell them, your profit is coming from "sweat equity" and would be business income, subject to ordinary income rates.  After all, what you're doing is almost exactly the same as what a homebuilder does.

Unfortunately, the line between the different scenarios is not clear except in the extreme.  The purchase and sale of one "flip" house would be a capital gain, the purchase and sale of multiple houses as your primary source of income would be a business.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
speedway121
Level 2

1099-S Received for flipping property

The fact that I got a 1099S may raise eyebrows from the IRS if I dont file it explicitly in the Schedule D correct? 

 

I do have expenses to account for. Dont know how to best do this.

 

Which is more favorable Sch C or Sch D? 

I have a minimal net gain on the property of 5k.

 

I have a realized capital loss of 40k for 2020. 

I also have operating losses carried forward on the Sch C from last year of about 3k. 

 

 

ColeenD3
Expert Alumni

1099-S Received for flipping property

Yes. You can add the expenses of sale to possibly create a loss on Schedule D.

 

The back of the Form 1099-S states:

 

To determine if you have to report the sale or exchange of your main home on your tax return, see the Instructions for Schedule D (Form 1040). If the real estate was not your main home, report the transaction on Form 4797, Form 6252, and/or the Schedule D for the appropriate income tax form.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
AmeliesUncle
Level 12

1099-S Received for flipping property

If you have a business of flipping houses, it goes on Schedule C.  If you are worried about the IRS looking for it on Schedule D, you can either (a) reply to the IRS notice that it is reported on Schedule C, or (b) ALSO report it on Schedule D, but have an equal amount for the cost and the sale price (resulting in a $0 gain/loss, because the actual transaction is on Schedule C).

 

If this is an isolated 'flip' that is not something that is regular, it goes on Schedule D.

 

speedway121
Level 2

1099-S Received for flipping property

If reporting it on Schedule C what do I put as the DESCRIPTION field?

"1099-s"?? 

ColeenD3
Expert Alumni

1099-S Received for flipping property

Yes, you can indicate that as a description. In that way, hopefully, the IRS catches on.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Dynamic AdsDynamic Ads
Privacy Settings
v