Tax Question on Capital Gains/Losses

Forum|Forum|4 years ago
April 28, 2022
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I have a few questions around a loss harvesting a scenario I am currently contemplating and wondering if it would work.

1. If I flip a house and make $100k in short term capital gains, can I use loss harvesting to, in the same tax year, realize $100k in losses in a long term stock investment? Assuming I have no other capital gain/loss activity for the year, would this fully offset the capital gain from flipping the house?

2. Same scenario as above – if it does fully offset, would there be any impact to my AGI right?

3. If I have a joint brokerage account, can I claim the losses for the above scenario even if I am not primary SSN on the account? Of course the primary will then no claim the loss

Appreciate any help! Thank you!

M

Mike9241

Flipping Houses: Capital Gains or Ordinary Income

If an investor is categorized by the IRS as a “dealer,” the profits from property flips will be taxed at their ordinary income tax rate. According to the IRS, a real estate dealer purchases real estate and sells it to customers “in the ordinary course of his or her trade or business.” Most fix-and-flip investors are considered dealers; they hold their properties short term and the majority of their income is derived from flipping houses. Even real estate investors who occasionally flip houses are typically considered dealers and are taxed at ordinary income rates.

you need to consult a tax pro to look over your situation and give you an opinion on how your house flipping is taxed. the last thing you want is $100K of ordinary income also subject to self-employment tax and a $100K capital loss

if the flip is capital gain it makes no difference as to the source of a capital loss. they're netted so if they offset there is no effect on federal AGI. state laws vary.

if the joint account is with your spouse who does the trading and the name/ssn make no difference if a joint return is filed. however, if you live in a community property state, then it's possible the results could be different.