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Key
Points for Certain Industries
Real Estate: Will
the real estate you buy be considered investor property or dealer
property? In general, if your intent at the time of purchase
is to buy the piece of property to rent out, it is usually considered
investor property. If your intent at the time of purchase is
to fix up the property to resell it without renting it out,
it is usually considered a dealer property. Here are some of
the tax differences:
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Investor Property
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Dealer Property
|
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Intent at time of purchase is to rent
out.
|
Intent at time of purchase is to fix up
to resell
|
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Hold for long term
|
Immediate resale for short term
|
|
Income on schedule E
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Income on schedule C
|
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Depreciation is allowed
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Depreciation is NOT allowed
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Rental Income on E, no SE taxes
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Rental Income on C, with SE taxes
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Can use the Installment Sale
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All taxes on profit are due in the year
of sale, no matter is sales is all cash.
|
|
Eligible for 1031
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No 1031 possible.
|
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Income passive, subject to passive loss
rule
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Loss deductible not limited to passive
loss rules.
|
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Can not be used to fund IRA
|
Income can be used to fund IRA, Keoghs.
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Traders: Do you trade stocks in the stock
market? Are you considered a trader or investor? This is a key
fact you need to know. If you are deemed a trader you will be
entitled to business deductions, an investor is not. Also, if
you are a trader or investor, a C corporation will be the wrong
entity for you. The corporation will either be deemed a Personal
Service Corporation or a Personal Holding Corporation. An LLC
would be a much better choice.
Internet Business: The Internet is not
a free way to avoid paying sales tax if you sell a product.
It recommended to speak to a CPA firm that understands multistate
taxation and Internet taxation.
How to Keep Your Business in the Top 5%!