Flip Income reported on 1065

[Carter Lance]

What is the correct way to report income generated from the sale of a flip home reported on a partnership 1065 return? Since the gains are short term capital gains and will be treated as ordinary income, should the sales transactions be reported on Sch D Part I for short term capital gains held less than one year? I know that it can be argued that if flipping homes is the only business activity in the company that the homes purchased and sold could be treated as inventory and activity would be reported on page 1 of the 1065. If anyone has experience in how the IRS would prefer to see this activity reported I would love to hear your feedback. 

Thanks,

Carter Lance