cientax Posted September 17, 2008 Report Share Posted September 17, 2008 Have a client that is house flipper, buys houses remodels them and sells them. He also builds houses and sells them. Some he will sell on installments and he carries the nots. This is his profession and we report the sales on Sch-C and carry inventory. We do not report these sales on Form 6252 since this is his business activity. My question is, is part of the payments that he receives monthly considered as interest income and reported as such or not? And if it is, is it reported on Sch-B or Sch-C? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted September 17, 2008 Report Share Posted September 17, 2008 If he carries the note, you would show the sale on Sch C, at the sale price, in the year of the sale. Then, do an amortization for the note he is carrying, and report the interest [only] on Sch B, as seller-financed interest. The principle portion will already have been reported on the C in the year of the sale. In following years, only the interest collected will be reported, and that will be on the B. Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted September 17, 2008 Report Share Posted September 17, 2008 Have a client that is house flipper, buys houses remodels them and sells them. He also builds houses and sells them. Some he will sell on installments and he carries the nots. This is his profession and we report the sales on Sch-C and carry inventory. We do not report these sales on Form 6252 since this is his business activity. My question is, is part of the payments that he receives monthly considered as interest income and reported as such or not? And if it is, is it reported on Sch-B or Sch-C? The portion of interest he recieves does go on Sch. B, why won't you report the installment sale on 6252? Honestly, I never heard of someone keeping homes/houses as inventory, I see these as investment properties that needs to go on a Sch E., if they are not being rented then you would elect to carryforward the expenses of maintaining (property taxes, insurnace, improvements etc....) the investment property until sold or rented. If I am incorrect regarding homes/houses as inventory on sch. C, can someone please enlight me? Quote Link to comment Share on other sites More sharing options...
Maribeth Posted September 17, 2008 Report Share Posted September 17, 2008 This is his profession and we report the sales on Sch-C and carry inventory. Because the activity of building, flipping and selling homes is the taxpayer's trade or business, the taxpayer cannot use the installment method of accounting for the sales. The taxpayer must report all of the gain (or loss) in the year of sale. See §453. That income will go on the taxpayer's Schedule C. If the taxpayer is very profitable, you might want to incorporate him and take the S election. It could save some SE tax. Also, I would not report the interest on Schedule B. I believe that it should be reported on the other income line of his Schedule C as it is interest related to his notes & accounts receivable. Maribeth Quote Link to comment Share on other sites More sharing options...
jainen Posted September 18, 2008 Report Share Posted September 18, 2008 >>I never heard of someone keeping homes/houses as inventory<< What else would you call buying something specifically to sell at a markup in the ordinary course of business? Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted September 18, 2008 Report Share Posted September 18, 2008 >>I never heard of someone keeping homes/houses as inventory<< What else would you call buying something specifically to sell at a markup in the ordinary course of business? Got it, when it's thier trade or business. Quote Link to comment Share on other sites More sharing options...
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