Ladies and Gentlemen, Not just a CPA should be consulted but also an EA(Enrolled Agent) That is someone who is licensed by the Department of Treasury in tax. All of their CE is in tax specifically. Believe it or not a CPA is no required any CE in tax matters nor is an attorney. I specialize in tax and RE.
Pat: My first question is do you intend to continue to flip properties? If you do then you are considered involved in the real estate business. First thing you need to do is write a business plan. Believe it or not the IRS may ask for it. Second, As far as the rental property you should file a form 1065(partnership return) to account and apportion the income of the rental property. This will give you the most benefit as you may be continuing this arrangement for an extended period of time. This also simplifies matters if the IRS begins asking questions as mortgage interest statements are only issued in one SSN/EIN.
The only way to justify a flip on Sch D. is if you are only flipping on property with no desire to flip another in the future. And if in the future you do flip another then you better be sure you report it on Sch C, or create another entity in which ti flip the properties such as an LLC that files as an S corporation in order to create the best tax advantage. If you have any questions don't hesitate to contact me via private message or e-mail.
