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Capital Gains

Forum|Forum|5 years ago
January 8, 2021
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Purchased house, renovated it, then sold it.

TurboTax Business, Schedule D (Form 1065), Line F1, requires a selection of Non-Portfolio Asset or Portfolio Asset.

Question: Which is this transaction considered ??

Best answer by Critter-3

It is inventory not an asset at all ... you are in the wrong area. The sales price is income and the total cost of the home + renovation is inventory.

A

Anonymous_

Employee

More details are required, such as whether the house was purchased for the purposes of renovating and then resale, whether the house was purchased for rental income and, if so, were substantial services provided or was the house being rented on a short-term basis, etc.

For example, if the house was purchased to flip, then you (or the company) will most likely be considered a real estate dealer and the gain on the sale will be ordinary income (not capital gain).

If the house was renovated with the purpose of renting the property (i.e., passive income), then the house would be a non-portfolio asset for the purposes of entering the transaction into the program (examples of portfolio assets would be stocks, bonds, mutual funds, et al).

T

tatereiAuthor

Ok, to answer your question. The house was purchased for the purposes of renovating and then resale. So, is it considered a portfolio-asset or a non-portfolio asset? Thanks

Critter-3Answer

It is inventory not an asset at all ... you are in the wrong area. The sales price is income and the total cost of the home + renovation is inventory.

D

DavidD66

Non-Portfolio Asset. According to the IRS:

"Portfolio income or loss (shown in boxes 5 through 9b and in box 11, code A) isn't subject to the passive activity limitations. Portfolio income includes income (not derived in the ordinary course of a trade or business) from interest, ordinary dividends, annuities or royalties, and gain or loss on the sale of property that produces such income or is held for investment."

So, if the ordinary business of your partnership//LLC is to purchase, rehab, and sell real estate, then the house you sold would be a Non-Portfolio Asset.

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