Figuring out What's next?

[Eric Denton]

Happy New Year everyone!

I have a flip that I am finishing with a buddy (business partner). We will be done by February and did not do things in a traditional way. My business partner owns the home outright and we have a written agreement that we are financially invested 50/50. We financed the property traditionally to take advantage of a lower interest rate compared to going with a hard money loan and because of that needed to hold on to the property for 6 months. We expect to make a profit so what is the best way to avoid capital gains tax on the money we are going to make?

[Natalie Kolodij]

All correct. 

Entering into a flip with the intent to resell it for profit is a business and will be ordinary business income subject to SE tax. 

The tax forms will all be issued to his name so his CPA should be able to back out your share/ 1099 you for your portion so everything is reported correctly.