Taxes for flipping schedule C vs investment

[Patricia Vildozo]

Hello Community,

I opened an LLC, purchased a flip with it in 2018, had a bunch of issues while rehabbing it, when we were done with it, it didn't sell quickly, we try to refinance it, bank made me quit claim deed it to my name and the refinancing feel through. Finally, it sold at the beginning of 2019.

I know that is better to talk to a tax professional but my tax professional seems to be lost. On your experience, would it be better to consider it an investment or file schedule c ( purchased under company name and sold under mine, only one flip that year)? I haven’t included the costs for this flip in 2018, do I need to amend it if included in Schedule C?

What type of expense the 2018 property taxes would be I schedule c ?

I would really appreciate tour input .

[Drew Holland]

@Patricia Vildozo It's a combination of the comments on here.  The taxing authorities look at intent along with consistency.  You can say your intent was an investment and put on your Schedule D however if you're doing a few fix and flips a year then your intention will be irrelevant and taxing authorities will look at the consistency of the type of work you're doing and classify it has ordinary income for your Schedule C.  If you're planning on doing this type of work in the future then classify it as ordinary income to stay consistent, if it was one for that year then look at doing an Schedule D.  Not sure of the property value yet the tax savings might not make it worth it (i.e. accounting and tax costs = 2K; amended tax savings is 1.5K).  These high accounting costs sound like a real possibility with your incompetent accountant.  Shoot me a PM if you want to connect and discuss further.   

Some other notes; you have single member LLC so your name vs LLC name won't matter for tax purposes (I think this was mentioned). If you lost money then you'll have a loss carryover which may not be good now yet could help you in the future, typically your net operating loss (NOL) will offer more tax advantages than a capital loss (on your schedule D). Finally you may want to erase this post if you're planning on using Schedule D...