Schedule D help-short term capital gain real estate (fix and flip)


L

LarsenJT

I need help on schedule D-here's the quick details. I
bought a house at auction and paid for it through my home
line of credit for 76,000. There was a 3,000 dollar fee I
paid to the auctioneer. I sold it 4 months later for
110,000 and had expenses of 8,000 to fix it up. Questions:
Can I deduct the 3,000 dollars I paid to the auctioneer and
if so do I add that to the cost basis?

Can I deduct mileage I used to get to the house every day to
fix it up?

Do I deduct my home line of credit interest as an expense on
schedule D, or do I deduct it somewhere else?

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S

Seth

I need help on schedule D-here's the quick details. I
bought a house at auction and paid for it through my home
line of credit for 76,000. There was a 3,000 dollar fee I
paid to the auctioneer. I sold it 4 months later for
110,000 and had expenses of 8,000 to fix it up. Questions:
Can I deduct the 3,000 dollars I paid to the auctioneer and
if so do I add that to the cost basis?

Can I deduct mileage I used to get to the house every day to
fix it up?

Do I deduct my home line of credit interest as an expense on
schedule D, or do I deduct it somewhere else?
Why do you think schedule D applies rather than schedule C?
At first glance, this appears to be a business activity
rather than a passive investment.

Seth

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
B

Benjamin Yazersky CPA

Why do you think schedule D applies rather than schedule C?
At first glance, this appears to be a business activity
rather than a passive investment.
I think if this person just does it once- it's a capital gain
& goes on sch D

If buying, fixing up houses becomes his/her "day job"-
it's a business & goes on sch c & all the costs are inventory

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] >>>
-----> real address on hobokeni or hobokenx <-----
 
Last edited by a moderator:
S

Seth

I think if this person just does it once- it's a capital gain
& goes on sch D

If buying, fixing up houses becomes his/her "day job"-
it's a business & goes on sch c & all the costs are inventory
He went to the house "every day" to fix it up. That seems
like a day job to me.

Seth
 
Last edited by a moderator:
B

Bill Brown

The OP provided insufficient information for any of us to
determine whether he is engaged in a schedule C activity or
has a capital gain.
Can I deduct the 3,000 dollars I paid to the auctioneer
and if so do I add that to the cost basis? "
The auctioneer's fee is added to basis in the real estate.
Can I deduct mileage I used to get to the house every day
to fix it up?"
I'll have to think about that.
Do I deduct my home line of credit interest as an expense
on schedule D, or do I deduct it somewhere else?"
Subject to the $100,000 limit on heloc principal, the
interest could be deducted on Schedule A. Otherwise --
dang, it's late -- maybe it's capitalized.

In the next few weeks, I suggest you consult with a local
tax professional who is experienced in both taxation of real
estate transactions and taxation of small businesses.
Certainly do this before you buy another house to flip.
 
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J

Jay

I need help on schedule D-here's the quick details. I
bought ahouseat auction and paid for it through my home
line of credit for 76,000. There was a 3,000 dollar fee I
paid to the auctioneer. I sold it 4 months later for
110,000 and had expenses of 8,000 to fix it up. Questions:CanIdeductthe 3,000 dollars I paid to the auctioneer and
if so do I add that to the cost basis?

CanIdeductmileage I used to get to thehouseevery day to
fix it up?

Do Ideductmy home line of credit interest as an expense on
schedule D, or do Ideductit somewhere else?
Anything that is an expense can be deducted when flipping a
house. If this is your primary job, then you will need to
determine how you do it.

When I flipped mine, I already had a job but I went to the
house every day to check up on it.

I deducted mileage every day at the current rate.
I deducted ALL materials and tools required to do the job
I deducted ALL expenses in printing out flyers, ink, etc.
I deducted ALL fees, including insurance, closing fees and
home equity interest.

Since you are doing it for profit, anything that comes out of your
pocket is an expense.

So yes, you can deduct the auctioneer and all of your 8000
in expenses if they were used for the house.

Your mileage will vary upon the area you live in. Also your
interest is deductible as well and ANY interest on credit
cards you used to purchase things.

Since it is a short term gain, you will be taxed upon your
percentage of total income.

For example, if you make 40K a year and you make 50K off the
house, you will be taxed as if you made 90K a year.

A good way to bypass the system is this.

If you have a parent or family member who makes minimal
money and will stay in the 15% tax bracket, "pay" them
enough money to get them right below the 28% tax bracket.
Let them pay the taxes on that amount (basically you pay
them the money they would be required to pay) and then now
your income is lower and less taxes on the amount goign into
the next tax bracket. By doing that, you can save 13% off
any capital gains that exceeds the next tax bracket.

Hope pthat helps.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
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