taxes - flip corp selling prop to owners

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taxes - flip corp selling prop to owners

Steven Mitchell
Investor · san antonio, TX · Member since 2016 · 133 posts · 43 votes

We have a small rehab and flip company.  We are taxed at personal income levels on every flip. So buy for 50k, put in 25k, sell for 100k.  Taxed at 40% on that 25k.  Putting us all on the same page.

Could we sell that property for 75k and avoid the tax?

Could we sell it to the owners of the company?

If we cant, could we sell it to someone else, and then have them sell it back to us for the same price after a period of time?

So. Much. Tax. In. My. Life.  

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  • Jeremy Pakalka
    Houston, TX · Member since 2016 · 349 posts · 142 votes
    9y

    @Steven Mitchell I would contact a good CPA in the area that works with investors. He or she would be able to help you reduce your taxes based upon your financial situation. Some of my investors set up a S corp or LLC for better tax rates. They are even able to write off a lot of their expenses, like gas, while finding houses. Only a good CPA would be able to give you the real answers you are looking for.

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  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y
    Originally posted by @Steven Mitchell:

    We have a small rehab and flip company.  We are taxed at personal income levels on every flip. So buy for 50k, put in 25k, sell for 100k.  Taxed at 40% on that 25k.  Putting us all on the same page.

    Could we sell that property for 75k and avoid the tax?

    Could we sell it to the owners of the company?

    If we cant, could we sell it to someone else, and then have them sell it back to us for the same price after a period of time?

    So. Much. Tax. In. My. Life.  

    This is going to sound bitchy- and I'm sorry. Kind of. But any "I've got a way great to avoid taxes" idea someone on here as had....someone making tax legislation already figured out a way to block. I'd say...98% of the time. They're kind of good at getting taxes. 

    Can you sell the property for a net wash and make no money to avoid paying taxes? Yes? If you don't want to make money this is a great way to not pay taxes. 

    Can you sell the property to the owner of the company in some way to avoid taxes? Nope- arms length transaction this is going to cause you a whole headache. 

    Selling it to someone for $0 who then sells it back to you for $0...no matter how much later it is...also will not save you taxes in any way. 

    Does your company employ people to work on the houses? If so- talk to your CPA about a DPAD deduction. 

    Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
    Kolodij Tax & Consulting
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  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    Oh also- setting up an S corp or LLC has no implications on getting to deduct expenses.

    Both are pass through entities- and both will result and income at your current tax rate. There are some avoidance with both but with an S corp you'd also have to take wages and pay payroll taxes off of them. 

    I'd talk to a CPA and see what works best for what you guys are actually doing. 

    Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
    Kolodij Tax & Consulting
    WebsiteView Page
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