Flipping a home after living there for one year...legal/tax questions

[Chad Clanton]

Hello again everyone, and thanks in advance for putting up with all the newb questions! My wife and I moved into a 2007-built home in a newish (post-2000) subdivision about this time last year with the intent of staying there, but after being here for barely a year, the quality of construction (or lack thereof) is making us nuts. We just had to replace the well pump (glad the builder saved 5 bucks on that installation....), I'm certain that we have insulation issues, and a few other things. Nothing earth-shaking, but it makes me think terrible things about later routine maintenance. So, we've decided to add another bedroom/"miscellaneous room" and hopefully bath (have to check code), clean up, clean all the issues we've found (to a reasonable degree), and resell.

As background, this home was a short sale when we bought it last April, and there have been about 3-4 sales in the neighborhood in the past six months (out of about 25 houses, and 20 or so "for sale" lots). So, finally, onto the questions. What, if any, work can we claim for the (brand new) RE business (setup as a sole proprietorship until later this year) on our taxes since we are living here and bought it for that purpose? Or perhaps a better and much more concise question would be, should I speak to a RE accountant, or to an RE attorney for questions like this? I do apologize for the length of this post; I really will try to work on that. I may be a bit of an information junkie :-P Thanks again everyone for all the great posts on BP, and good luck!