In Early 2025 (this year) I purchased a duplex in TN for $300K with the intent of moving my sister to the Area. My intention was to rent it to her and treat it as a rental property. I understand the tax implications and handling of this which would have been as an investor.
However shortly after purchasing, we had some family drama, and my sister opted not to move and live in the duplex.
Therefore, I sold the duplex after only a couple of months (still in 2025) at a total loss of $30K (purchase price - sales price and expenses). For discussion purposes lets assume that the property was bought outright with cash so there is no mortgage interest etc. to consider.
The original intention was to be treated as an investment, and as such the sale would be classified as an investor and ultimately would end up treated as a short-term capital loss. However, on the other hand this starts to look a lot like a flip which and as such treated as a "dealer" And in that case the loss would be treated as a business loss reported on Schedule C. Since the so-called business was a loss things like SE tax are not really a consideration.
I know on this subject the IRS talks about "intent" but since there is only one short term real estate transaction it seems like I could probably argue either way "investor" or "dealer".
I can go either way as I have other capital gains that I can offset (investor) as well as income I can use to offset (as dealer). I'm just trying to figure out what is the proper way to handle this.
