tax consequences of assignment of contract

[Jim Williams]

has anyone had any experience, from a tax standpoint, in assigning a contract for profit? in other words, what type of income does irs consider this transaction for person assigning?

jim

[Dave Toelkes]

I am more cautious here than most. In my view of the world, the answer is always -- it depends.

You did not tell us whether you are doing this as a business. If you are assigning contracts as a property flipping technique, then you are engaged in an active income business. In your business, I see your contract as merchandise to your business. Capital gains rules don't apply to merchandise.

Your income is ordinary income (not capital gains income) taxed at your ordinary income tax rate. Also, since you are doing this as a business, self-employment income taxes come into play.

Suggest you consult with a couple of experienced tax professionals before you file your tax returns. Even CPAs don't know all the rules for every situation, so get several opinions from licensed professionals. Don't rely on the accuracy of an anonymous web poster.