Flip Income Tax help needed (and appreciated!)

[John M.]

Oh man how I hate doing taxes! Although I must admit that as I learn more and more, it does get a bit less intimidating. I've got pretty slim chances of getting an audience with a CPA this week so I hope one of you guys can advise me (Joe??).

Background: I've got several single family rental houses and I've done a few fix-and-flips as kind of a side job. But now my RE activities are taking the forefront and I've all but quit accepting environmental consulting jobs (former day job). In the past I have (incorrectly, I now realize) treated fix-and-flip income as short-term capital gains. Hopefully I won't be too bad off if the IRS checks me out since I believe the short-term capital gains rate is the same as my ordinary tax rate, but I'm starting to think that maybe I should have paid self-employment tax even though I only did a couple.

In any case, now that I am going to focus more on REI, I will set up a S-corp to do the fix-and-flips and a llc for the rentals. But I'm having trouble figuring out how to report the last two flips that I did in my name. Basically, my question is how do I report business income/loss on my personal return when there isn't an actual business entity? Do I use Schedule C even though is says it's not for "a sporatic activity or a hobby"? I'm not really sure that my flip activity could be called continuous and regular. I spend a large portion of my time personally rehabbing properties to rent out (not the most effective use of my time, probably, but I enjoy it), but I think that should be considered a separate activity. Schedule C doesn't really look set up well to deal with flips and it appears that I still can't get any credit for my own labor.

Perhaps I should report my flip income on Line 21 - Other Income?? If so, I'm unsure of how to tackle the accounting: just add everything up that I put into the property and subtract it from the sales proceeds? What can I include? Personal labor, mortgage interest, insurance, etc. or just purchase cost + hard rehab costs?

And I guess I need to download and study Schedule SE for the Self-employment tax? Oh goodness, the IRS is taking all the enjoyment out of real estate investing and not even giving me a credit for it! :beer:

Any guidence appreciated!

JMac