Tax treatment of cheap house sale that was never rented.

[John Teachout]

We purchased a fixer up house a year or two ago that we decided we didn't want to fix. We bought it cheap and sold it cheap. The sales contract price is $10,000. We probably have $7,000-$8000 in it and essentially just used it to store construction materials in we use on our other properties.

So, this house was never "held out" for rent, is going to net such a small amount it wouldn't be worth doing a 1031 exchange and may not even be eligible for one. How is it treated from a tax standpoint? Capital gains? regular income? or???

Our profit after closing is likely going to be $2000 give or take a bit. I guess it would be like a flip but we didn't improve the property at all...

What say ye?

[Dave Foster]

@John Teachout you actually did hold it for productive use in trade business or for investment.  It was used as a storage facility for your house renovation business.  That would indeed make it eligible for 1031 treatment.  There is no specific income requirement.  And you have held it over a year so it should also qualify for capital gains treatment

However, with 2k of gain you're looking at at a tax bill for capital gain of around maybe 400 or 500 dollars.  The cost of an exchange would be around $750.  Pay the tax and get rid of the property.