1st flip ... good profit...but I'm afraid of taxes!

[Sagnik Lahiri]

Hi everyone!

Bought a property under my name for a buy and hold. Got great interest and now I'm fielding offers.

Bought it for $110K, spent $70k in fixing it. Have 2 offers for $260K.

Now that the flip is a viable option, I'm afraid of my tax liability. I owe nothing on the property.

I'm trying to figure out my tax liability and how much I can reduce it by transferring ownership into a LLC or C Corp and selling it that way??

Thanks in advance.
SL

[Steven Hamilton II]

Sagnik Lahiri,

More information is needed.

We need to know when you bought it.
Did you rent it out?
Are you intending to continue flipping or is this just an opportunity that you couldn't refuse?

Your basis in the property unless it was rented is 180k plus holding costs (i.e. taxes, insurance utilities). Your potential gain is 80k. Short term the liability is dependent upon your tax bracket which will be the case if you are now in the business by planning to continue flipping homes.

If you are planning to fix and flip transfer to an S-corp and after you sell pay a reasonable salary to yourself dependent upon how much your other income is.

If this is held at least a year and one day you are looking at long term capital gains.

-Steven the Tax Guy

Your guide to IRS laws, rules and regulations.