Basis for Taxable Income

[Gary Michalske]

Hey there BP Tax experts,

I have a question regarding taxable income from property sales. I have a CPA that does my taxes but I’m not convinced he’s an expert on the real estate side of things. And furthermore, if I call him to discuss options or just to explain things he charges me $75 and that kind of bothers me. Hint...hint....

Here’s my current transaction scenario. I’m kind of doing a favor for my real estate agent’s mother. She is going to purchase a house from me after I purchase it from the seller. I’m only looking to make $2,000 for my efforts.

Purchase price: $130,500

Repairs: $7,400 (I pay for the repairs)

Selling Price: $139,900

My Profit: $2,000

The purchase closes on 7/28 and the sale will close on 8/17.

My question is what will be the basis of my taxable income on this? I work a full-time W2 job and have a LLC on the side with which I use for business transactions as described here. My thinking is the $2K will be considered regular income taxed at the tax bracket rate defined by my W2 job. I don't think I will be charged capital gain tax or self-employment tax.

I know the profit is a very small amount but the example would apply to larger transactions too. Will someone let me know if my assumptions are correct please?