Capital gains or ordinary income on house sale?

[ACtaxpayer]

I am a realtor in California and I bought a house as an investment then resold it 366 days later for a profit.  Can I count the gain as capital gains or must I count it as ordinary income since I am a realtor?  I put about $50,000 into the property before reselling it, including repairs and improvements.  I am not a contractor or handy person and I did not do the improvements myself, I hired them out.  I never lived in the house nor did I rent it.  I thought about keeping it as a rental property but since the real estate market was so hot I decided to sell it instead.  I owned it exactly 366 days.  Other information in case it is relevant: I have never flipped a house for a profit before, however, in 2019 I flipped a house at a loss...that was the first time I ventured into flipping, but because I did not make money that time, over the next three years I focused instead on selling homes as a realtor (to other people).  It wasn't until summer of 2021 that I bought another property myself as an investment, which as I mentioned, I just sold 366 days later.  Thanks in advance for your help.

[Anonymous_ · Accepted solution]

You should consult with a tax professional in your local area.

See https://taxexperts.naea.org

Regardless, your gain will probably be considered capital gain on this transaction since it appears to be, generally, a one-off.

However, if you wind up classified as a real estate dealer by the IRS, the gain (profit) will not only be considered ordinary income but also income subject to self-employment tax. Some of the factors to be considered are the number and frequency of purchases and sales, your intent, the number and extent of improvements, et al.

[ACtaxpayer]

Thank you very much for this answer, I greatly appreciate it.