Ways to minimize capital gains tax after flip

[David Anderson]

We have a LLC that just closed on a flip where we made short term capital gains on. We decided not to do a 1031 exchange, but are looking for ways to minimize the taxed amount. Under this LLC we also have rental properties that we still own. We have tracked all of the expenses for this flip which includes all transportation costs, labor, and supplies. Does anyone have any suggestions to minimize the taxed amount?

[Natalie Kolodij]

Well...there are a few things. 

1. That flip is going to be ordinary income - not capital gains. 

2. You didn't decide not to do a 1031. A flip doesn't qualify for using a 1031. So the IRS decided that one for you. 

3. Are you going to keep doing flips? Are the proceeds going to be over $60k? 

4. Put it in a separate LLC than the rentals- it's like trying having the same coach for both your ballet dancers and football players...neither will be able to be optimized. They require different things.

5. Talk to your accountant, if they're versed in REI they should be able to help you, potentially with some entity structuring, that can help mitigate this income.