Discussion:Home sale (capital gain vs self-employment)
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Discussion Forum Index --> Tax Questions --> Home sale (capital gain vs self-employment)
| 30 October 2006 | |
| If a person who has a full-time job purchases a fixer-upper house, and in fact works on the home during the weekends and ends up selling that house for a profit - is the sale reported on Sch C (subject to self-employment tax) or on Sch E (not subject to se tax and if held for more than a year, then subject to the favorable capital gain rates)? There is no personal use of the home and it is not placed in rental use.
What is the determining factor that makes the sale subject to capital gains vs self-employment? Is it (1) the intent when the house was originally purchased? (2) the time the man spends actually working on the house or (3) the extent of the improvements (4) the time between purchase and sale? | |
| October 30, 2006 | |
| None of the above. It's about whether what he's doing rises to the level of conducting a business, which has to do with how many of these has he done or is he doing, etc. In this case, easy call. Sch. D cap gains. After he does a series of these, maybe it's a business. | |
| 30 October 2006 | |
| If this is an infrequent event, then Sch D. If he does this as a trade or business, then Sch C. In no case would it be Sch E. | |
| 30 October 2006 | |
| The instructions for schedule C say to use C if your primary purpose for engaging in the activity is for profit AND you are involved in the activity with continuity and regularity. A sporadic activity does not qualify as a business. It sounds like your case is a D. | |
| 31 October 2006 | |
| Clearly not Sch E, if not placed in service as a rental. Sch D. If held more than 12 months, then considered long-term, subject to capital gains rates. If held less than 1 year, considered short-term, subject to ordinary rates. | |
| 31 October 2006 | |
| You know what I'm starting to think would be another good addition to this site? (And perhaps it's here and I just haven't looked hard enough, since I usually go straight for the discussion board) How about a list of FAQ's? This is one of those questions that I believe I see posted quite frequently. Just an idea... | |
| October 31, 2006 | |
| MSTguy:
Select the Start new Article link in the navigation box on the left and start assembling one. I'll link it into the topic list and also create a FAQ index. The community could then just link people over to these FAQ topic pages instead of having to re-answer the same questions multiple times. Let me know if you (or anyone else who wants to help) needs help. - Tim Doyle, TaxAlmanac Moderator - Talk to me 22:02, 30 October 2006 (CST) | |
