Search Help


Enter one of more keywords to search. Use quotes for “exact phrase.” Note that '*' and '?' wildcards are supported.

When your search results appear, you can refine your search further: Sort for only results in which all search terms appear AND/OR sort by chronological order.

Article Date:
May 2010


Word Count:
1693

 

 

Defining “Real Estate Investor” and “Real Estate Dealer”


Let’s start with the big-time tax consequences.

 

Profits on dealer sales are generally subject to taxes at both

 

·

ordinary income rates of up to 35 percent, and

·

self-employment rates of up to 14.13 percent.1

 

In addition, dealers may not

 

·

depreciate property held for sale to customers,

·

use the tax-favored installment method to report their property dispositions, or

·

defer taxes by using the Section 1031 tax-deferred exchange on dealer properties.

 

Good Tax Breaks for Dealers

 

Tax law treats the dealer just as it does any business, and that includes some good things for tax purposes.

 

1.

Dealers treat real-estate selling expenses, commissions, legal fees, and advertising as ordinary business deductions.

2.

Losses on the sale of dealer properties are not limited by the $3,000 capital loss cap that exists for investor properties.

3.

Dealers deduct the loss as an ordinary loss.

4.

Dealers deduct the entire loss (immediately or over time using the net operating loss rules that allow carryback for up to five years and carryforward for up to 20 years).

 

 

Good Tax Breaks for Investors

 

Profits on investor sales are

 

·

taxed at tax-favored capital gains ... Log in to view full article.

Already a subscriber?
Email Address
Password


You’ll be able to read the full article and get instant access to the last few issues of the Tax Reduction Letter
Not yet a subscriber?
with a money-back guarantee



Powered by Cranium Softworks - CMS, Subscription Mgmt & Web Development

 

SS