2 person LLC flipping houses.Bought house 2017.Cost basis =purchase price +expenses n 2017/18?Ordinary inc or cap gain?Investor received money back + 3K. Treatment of 3K?

[jdayfkin1]

Bought house in 2017 and sold in 2018. Assume I am considered a dealer since flipping houses is why we formed the LLC. thinking this is ordinary income for the LLC to be distributed to the 2 members but want to make sure. Believe the $3K given to the investor is an expense for the LLC (what kind of expense?) and income for the investor. Should I have provided a 1099 to the investor for $3K?

[MichaelL1 · Accepted solution]

It is ordinary income as you are in the business of flipping homes.

Was the investor actually owner some of the company or just gave you a short-term loan and then got some of the profits?

Yes, there should be a 1099 issued and depending on if it was a loan or percentage of profit, the 1099 would be a 1099INT (interest) or 1099Misc.

[jdayfkin1]

On the 1099 it was a percentage of profit.  So is it box 3 other income or box 7 non employee comp? Is it too late to issue the 1099misc? Or better late than never?

[MichaelL1]

Better late than never

[MichaelL1]

Let IRS know this was first year and not aware of 1099 requirements and they are pretty good first time of no penalty.  I would file it today (Feb 28th) or mail today, as March 1st would be two months late.