Avoiding the "Broker Dealer" taxation

[Scott Schultz]

I am a Broker in WI turned full time investor, I use to just flip, but am now adding rentals, 4 in the last 9 mo. If I was not a broker my rental income would truly passive and not subject to self employment tax, but as a Broker the IRS says I'm a broker dealer, and rents are subject to self employment tax, I want to keep my license to have access to MLS for valuation and for Listing my own flips, any advice or what others are doing would be fantastic. Thanks in advance.

[Cameron Skinner]

ok I have been licensed to practice tax for almost 20 years and own a bunch of rentals.  While the tax law is huge, I have never heard of a broker having to pay SE on rents they receive for something they own and rent as a personal investment.    The dealer vs. investor situation usually only refers to flips.  Rental real estate is passive by nature and even those who actively and materially participate and real estate professionals don't pay self employment tax.  IRS does considers brokers who buy and sell real estate as ordinary income not capital gain.  But rentals are a completely different animal.

Hope this helps good luck