I buy, remodel, then sell homes. How do I claim income on form 1065 and not pay capital gains on the profits we make. There are four of us and we do all the work.
I am filing a Form 1065. My LLC has four members and we buy, remodel and sell residential homes. We do all the work ourselves, and I am wondering how to report our income when we sell the house since we don't pay ourselves for the work we do. Will I have to pay capital gains even though we did the sweat equity?
I have copied and pasted some information from various web pages that should help
Individuals who actively purchase and remodel real estate for profit on
a continuing basis. They are classified by the IRS as dealers rather
than investors. For these people, the real estate is treated as
inventory, rather than capital assets, and the profits on the sale of
those properties are treated as ordinary income, subject to the self-employment tax.
Many expenses must be capitalized and allocated into each project, and then deducted when that project is sold.