CPA in the House? Capital Gains question

[chocolatelab]

I flipped some properties last year with some business partners. I want to characterize the proceeds as capital gains. My accountant thinks its a stretch and thinks it should be ordinary income.

Any thoughts from the accountants?

[look 171]

I did the same and my accountant thinks its income. what's the %age difference between the two?

[chocolatelab]

If I can characterize it as capital gains I've got losses to completely off set the profits. He said if we had done everything under an llc I could probably have shown the proceeds on a K1 as capital gains.

[qikcpa]

i would say it depends. if its a regular activity for you like a business (in which you are involved in management) then its likely ordinary. if you just handed over a check and then got one back i would call it capital (short term unless you held it for more than a year)...and then of course theres everything in between.

[chocolatelab]

great point qikcpa

I did one in 2009, 4 in 2010, and have 3 going now.

I am concerned that if I claim capital gains for 2010 that if i get audited 3 years from now and i have done 3-4 each year ill have a situation on my hands.

[MT930]

Depends on how long you held the property if your intent was to sell for a profit short term. Ordinary income
Accountants call it seasoning consideration.

Less than two years =ordinary income.

More than two years= Cap Gains

Your CPA Knows Best !