How to report taxes when Flipping homes under a business entity

[Ross Roz]

I have an LLC partnership with a total of 3 members that was open so we could flip some houses. We bought 2 properties under the business name, paid cash for them in 2016 have not sold any yet, We have spent money to rehab both of them, however I am not sure where to report the expenses for rehab and the cost of the homes on form 1065?

[Linda Weygant]

Since the houses have not sold for 2016, there is no income related to the purchase and fix of the house as of yet.  You will accumulate all those expenses and report them in the year of the sale of the house(s).

You may have other expenses within your LLC related to the running of the business, but not related to the actual flip of the house. This could include Meals & Entertainment, Office Supplies, Telephone and other business related expenses. These expenses will be reported on a 1065 with the associated summary losses reported on a K-1 to each individual partner.

If you do not have these types of expenses, the IRS may still inquire as to where the 1065 is.  In order to head off that inquiry, you can file a 1065 with zeros now or, when the time comes, spend a little time later either on the phone or writing a letter to the IRS letting them know that there was no income to report in 2016.