Beginner investor confuse on which corporation to form

General Real Estate Investing
1

I’m in the process of buying a house an intend to sell it within 2-5 months. And I’m planning to buy 3 more houses to buy and sell for the rest of the year. I want to know, should I form a c or s corporation or LLC or should I better off doing it without forming a corporation? I read some article from william bronchick, if you are actively buying and selling real estate, the irs may consider me as a dealer, and that the gains from the sale of real estate will be subject to self employment tax, which was about 15%. Now, if I don’t form a corporation, I would pay about 40% on the capital gain tax. Is that true? Now I heard from others that capital gain tax are the same whether you are individual or coporation. I want to form a corporation just on tax purposes, which one should I choose so I pay less taxes. I need opinion on this.

Thank you

2

Right now the maximum long term capital gain tax or corporations or individuals is 15%. Short term Capital gain tax applies at whatever your tax rate is that year.

There are a number of factors that determine if you are a dealer. One is if the majority of your income is from short term fix up and sell. Another is if your intent was to resell if it it took you longer than 12 months. You then file on schedule C as an individual. As a dealer you lose 1031 capability. Your houses are inventory and no long term capital gain. No installment sale treatment for dealers either.

To comment on your particular situation more information would be needed.