flipping + taxes

I have an investment property I am flipping that I own jointly with another person (not LLC). There are two questions I am trying to find answers to.

  1. Can I deduct purchase expenses (closing costs) and selling expenses (realtor commision) from my taxable gains if the property is not held via LLC?

  2. If I flip the property in less than a year, is there a way that I can defer taxes on the gains to a year + 1 day after the property was purchased in order to pay taxes on the gains at the capital gains rate (long term) instead of my normal income tax rate (short term)?

thanks in advance!

my thoughts:

  1. selling expenses are always deductible regardless of entity type held in.

  2. deferring the gain would be a “structured” transaction and technically would constitute fraud.

  3. Is the property being rented in the meantime? Keep in mind that if you purchased the property with the intent to resell, rather than buy and hold, that makes you a “dealer” on this property and it is always regular income and never capital gain regardless of the holding period. (And contrary to what you may hear, you CAN be a dealer or not on a property-by-property basis even within the same entity…but you have to document your ass off). So if you intend to buy/sell, the holding period is irrelevant.

Mark Wagner, CPA, LLC