Flipping land

[tuerkitas9]

I started to buy and sell land making profit, which is now like a business for me. I don't have an LLC but will make one this year. How do I report this on my taxes? I did also had expenses (car, maintenance, and ofcourse basis cost, etc) can anyone provide some guidance please? 

[AbrahamT]

It all depends how you set up your business. Are you setting this up as a single member LLC which in that case all your income and expenses will be reported on your personal tax return on a Sch C. Or maybe your'e going the route of setting a 1065LLC partnership in which case you will report the income and expenses on a partnership return and consequently generate a K-1 for each of the partners showing your net income from the business on that Box 1 on the K-1 which will then be reported on your personal tax return from there. In either case, you will have to keep a record of all your income and expenses incurred for the period in question.  

[tuerkitas9]

it will be a single member LLC but that is for this coming year. Last year I did not had any LLC I bought like 15 lands and sold about 10 my questions is how do I report this because technically is a business. I worked on it, made profit and had expenses and basis cost of every land

[Vanessa A]

Since this is a single member LLC, you will report this on Schedule C as business income using the business section of TurboTax Home and Business or Self-Employed.  Whether you are a sole proprietorship or a single member LLC, your filing will be the same as long as you do not elect to be treated as an S Corp.

 Basically, you would treat the land as inventory.  Land is not a depreciable asset, so that would not be an issue.  Your expenses would be deducted on Schedule C.  You will simply walk through the business section and enter any expenses you had for things such as clearing the land, property taxes, etc. 

You will report the sales amount as income, in the business income section. 

You will not report the entire cost of all your land purchases as an expense, instead, as you walk through the inventory section, you will enter a beginning and ending inventory as well as cost of purchases.  You will also be asked for costs to prepare for sale. 

 If you made your first purchases in 2022, your beginning inventory will be $0.  Your ending inventory will be your purchases minus the cost of the lots you sold.  So if you paid $10,000 for each of your 15 lots and sold 10 of them for $25,000 each, you would report your beginning inventory as $0, your ending inventory as $50,000 (($10,000x15=150,000)-(10 sold x 10000=100,000)=50,000) or the 5 lots you still had at $10,000 each. 

 If you paid different amounts for each lot, then you would use the amount you paid for that lot to deduct from your ending inventory. 

Walk through all of the questions in the business income and expense section.  You will be able to deduct vehicle expenses, home office expense and any other expenses incurred in the selling and prepping process.  If you are unsure of something you can click on the learn more link for help or post another question here in community.