I have a quick question. Let me give you a little background. I am a contractor in Texas and I recently entered into negotiations with a motivated seller to renovate his property for selling purposes. The appraised value on the home is around $64,000 and he just wants $31,000 FREE AND CLEAR.
I have estimated labor and materials to be about $16,000. He has agreed to pay me the $16,000 and any remaining profit after the sale of the property. My question is will I have to pay capital gains on the profit or would it be considered income taxed since he is paying me from his proceeds.
Any help would be incredibly helpful.
Thank You
The 16000 for fix ups i would just have him pay you like a normal customer but the additional profit i beleive would be captital gains. Your accountant will be able to clarify and if he or she does let me know. Thanks
I HIGHLY doubt it, By the same logic any GOOD real estate agent would max out their capital gains in their first three years!
Capital gains is all about ASSET APPRECIATION, you never owned the property, If I were you, I would just buy it for yourself after its fixed WHOLESALE, with only 46,000.00 less your revenue it could easily be a good rental.
Search IRS>GOV for more info…
Thanks for the input guys.