Specifically, if you are classified as a dealer, it’s just like running a retail store: The IRS considers your profits to be ordinary income, rather than investment profits.

They talk a lot about maintenance and the owner's right to charge the tenant for any damage except "ordinary wear and tear".

The danger I see in your current structure is the small chance that the IRS comes in and re characterizes the sale of a rental property from capital gain to ordinary income.

This is an old tax put in place to deal with non-profit trusts engaging in ordinary business and having an advantage over for-profit business by not paying any tax.

Of course the dealer tax, meaning the value of the note is seen as ordinary income in the tax year it was produced... that I shoulder all by my lonesome... that is a IRS tax... gotta pay for the wars (which are a bailout of sorts), bailouts, handouts and all the rest of the good stuff the FEDs are spending money on these days...

INCOME2,085.454170 · UTILITY RECOVERY4026 · LBP SPREAD1,860.00Total 4170 · UTILITY RECOVERY1,860.004185 · ASSESSED CHARGES4186 · KEYS, LOCKS, LOCK CHANGES20.004190 · PET DEPOSIT - NON REFUNDABLE200.004192 · OTHER ASSESSMENTS/IMPROVEMENTS140.00Total 4185 · ASSESSED CHARGES360.00Total Income47,814.02Expense6200 · ADMINISTRATION6220 · BANK FEES44.616311 · OFFICE SUPPLIES/COPIES105.786313 · EXPRESS MAIL/STAMPS134.936320 · MANAGEMENT FEES3,196.566334 · EMPLOYEE ACTIVITIES/EVENTS29.776340 · PROFESSIONAL FEES29.176345 · ATTORNEY FEES552.046351 · ACCOUNTING SOFTWARE17.956352 · RADIO USAGE345.196389 · LATE FEES/SERVICE CHARGE5.00Total 6200 · ADMINISTRATION4,461.006205 · MARKETING EXPENSE6211 · NEWSPAPER (TW & HISPANIC)58.66Total 6205 · MARKETING EXPENSE58.666330 · ADMINISTRATIVE6333 · EMPLOYEE INSURANCE225.00Total 6330 · ADMINISTRATIVE225.006400 · UTILITIES6448 · ELECTRICITY- VACANT305.876449 · ELECTRICITY- RESIDENT844.256450 · ELECTRICITY-COMMON887.006454 · GAS-COMMON6,528.876455 · WATER CONSUMPTION1,273.096456 · SEWER1,925.646458 · STORMWATER152.966459 · REFUSE TIP FEE54.406460 · EMSA Fee43.686547 · TRASH PICK UP606.50Total 6400 · UTILITIES12,622.266500 · REPAIRS AND MAINT.045 · PAINTING SUPPLIES/DRYWALL133.326519 · EXTERMINATING SUPPLIES36.006523 · MAKE READY SUPPLIES39.896539 · EMPLOYEE MILEAGE (OFFICE/CREW)347.756544 · MAINT SUPPLIES/REPAIRS517.756551 · EQUIPMENT RENTAL5.006643 · PLUMBING PARTS171.61Total 6500 · REPAIRS AND MAINT.1,251.326538 · MAINENANCE PAYROLL6382 · OVERTIME TO DO134.566543 · REGULAR MAINT.185.126546 · REGULAR MAKE READY632.486548 · REGULAR TO DO4,188.78Total 6538 · MAINENANCE PAYROLL5,140.946700 · SERVICE CONTRACT/CONTRACT LABOR6383 · CARPET CLEANING185.006386 · LAWN CARE/LANDSCAPING1,412.276530 · TENANT ALARM41.176707 · MAKE READY1,515.006717 · CHEMICAL LAWN TREATMENTS220.006721 · EXTERIOR PLUMBING375.006731 · EXTERMINATING180.00Total 6700 · SERVICE CONTRACT/CONTRACT LABOR3,928.447000 · TAXES AND INSURANCE7010 · REAL ESTATE TAXES886.507013 · PERSONAL BUSINESS PROPERTY TAX1,873.007023 · PROPERTY & LIABILITY INSURANCE2,245.08Total 7000 · TAXES AND INSURANCE5,004.58Total Expense32,692.20Net Ordinary Income15,121.82Other Income/ExpenseOther Expense7510 · CAPITAL REPLACEMENT7532 · REFRIGERATORS200.007538 · WASHERS783.187583 · HEATERS215.957585 · HVAC660.04Total 7510 · CAPITAL REPLACEMENT1,859.17Total Other Expense1,859.17Net Other Income-1,859.17Net Income13,262.65

@Aaron Hunt I would agree if this were an ordinary theft with an unknown person committing the crime.

@Mary Shea  good plan .. but when you represent your self you can lower the purchase price by the BAC commish.. or you can get a commission that will help with your cash flow.. tax's are the same its both ordinary income.. but you gets some money up front not at the end of the flip.but If the agent is bringing you the deal then yes you want to respect that and use them for the buy and the list back..

Flipping profits might be considered ordinary income, while income generated from a long-term rental may be considered passive income.

Interest income is ordinary income3.