Short term capital gains

Forum|Forum|3 years ago
December 11, 2022
1 reply
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Single member LLC. Several property flips for year 2022. Short term capital gains of around $85,000.00. Need creative recommendations to reduce my tax liability for year 2022. I have a high W2 income so tax bracket is on the higher end. I have expenses that can be deducted for repairs/upgrades to properties but not enough. Any ideas? I have read about depreciating the purchase of a company vehicle but not clear on specific details it would be a truck not a corvette. 1031 was not an option due to the nature of the rapid real estate transactions. I would prefer to do something that I can use or benefit from now and not if I make it to 65 years of age.

Best answer by Anonymous_

@Skywalkerllc wrote:

Single member LLC. Several property flips for year 2022. Short term capital gains....

You initially need to determine whether or not you would be considered a real estate dealer as opposed to an investor in real estate.

If the properties were being purchased and repaired/improved, primarily for sale to customers in the ordinary course of business, then the gain is not capital gain but ordinary (earned) income and subject to self-employment tax. The profit would be reported on Schedule C of your individual income tax return.

@Skywalkerllc wrote:
1031 was not an option due to the nature of the rapid real estate transactions.

Section 1031 would not be an option if you are considered to be a real estate dealer with respect to any properties since that section does not apply to inventory.

See https://bradfordtaxinstitute.com/Content/Defining-Real-Estate-Investor-and-Dealer.aspx

Anonymous_Answer

Level 15

@Skywalkerllc wrote:

Single member LLC. Several property flips for year 2022. Short term capital gains....

You initially need to determine whether or not you would be considered a real estate dealer as opposed to an investor in real estate.

@Skywalkerllc wrote:
1031 was not an option due to the nature of the rapid real estate transactions.

Section 1031 would not be an option if you are considered to be a real estate dealer with respect to any properties since that section does not apply to inventory.

See https://bradfordtaxinstitute.com/Content/Defining-Real-Estate-Investor-and-Dealer.aspx