Hi all, A buddy of mine and I are planing to partner up and repair and turn properties. We plan to put down payment together, get a tough cash loan, rehab and then offer properties. I am an experienced buy-and-hold financier and have actually been doing this for a few years. However this would be my first time fixing-flipping homes. I have a full-time W2 earnings (not connected to property) and do my investing part-time.
I have actually been reading online, and there appears to be a possibility that internal revenue service can identify us as a “dealer” if we flip a few residential or commercial properties in a year, and then we can be based on the 15% self employment tax. We want to prevent that from happening. Hence I wish to ask skilled folks on the board who have been flipping homes – what can we do to prevent being offered the “dealership” status by the IRS? Do we need to use entities (like LLCs, C or S-corps, etc) to overcome this?Any info
on this would be greatly appreciated. Thanks everyone.
