Avoiding Capital Gains

[Reagan Enger]

Hello everyone,

I have a tax question that I was hoping to find an answer for on this forum. A little background, I am a licensed general contractor in the state of Idaho, and I also have another company solely for investment purposes ie. Real estate, businesses, etc. I have a cash investor and want to start flipping homes but want to avoid short term capital gains if possible. I was curious if the following scenario is plausible (and legal): Let’s say my investment company is loaned the cash (@9% interest) to purchase a flip. My investment company then hires my construction company to perform the rehab on the house. Construction company then invoices investment company for an amount equal to the profit from sale of the house (less 9% interest to be paid back to investor) thus creating a net ~$0 situation for my investment company. The profit from the transaction then winds up in the construction company’s account and is taxed as ordinary income to the construction company. Is this something that can be done? I hope that situation makes sense, and that this is a good place to ask for help on this! Thanks.