2014 tax for flips

[Bang Tran]

Hello everyone, I have a capital gains tax question. I purchased and flipped a house April 2014 and sold it in September for a profit. I turned around and bought another house in December and sold it in January 2015. So my question is do I need to file taxes and pay capital gains tax on my first house I bought in April 2014 or can I roll it over to 2015 with the second house I bought in December and sold in January 2015?

Thanks BP

[Brandon Hall]

Marshall Hall you are correct for the most part except that intent is evaluated on a property-by-property basis. If you can't show that you intended to rent the property, you're intent will be to flip (or some other method) and you will be hit with SE taxes.

That being said, if you do these very infrequently, there is potential to classify intent as "buy and hold" rather than flip. The argument would be that while you intended to buy and hold, a sweet deal came along that you couldn't pass up. This is better supported if you have rental properties in your portfolio that you have been holding for a while.

So while intent is evaluated on a property-by-property basis, they will look at the whole portfolio to support the intent of the property under question. If you are flipping a house once every two years, you may be okay. If you are flipping a house one or twice a year, you may come under fire.

My advice is not to go this alone. Get a CPA to help protect you should the IRS decide to wage war.