SPEC HOME SALE "SPORADIC ACTIVITY"

Forum|Forum|2 months ago
April 9, 2026
2 replies
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A client bought a lot and built a home to sale for profit. The home sold in 2025. In the past this type of endeavor was reported on Schedule C with self-employment tax ramifications. According to the 2025 Pub 17, income from a "sporadic activity" is not considered a business and should be reported on Schedule 1 of the 1040.

I would appreciate other's opinion on this change in treatment of an occasional builder not being subject to self-employment tax. Should the profit from the sale be reported on Schedule C or 1040 Schedule 1?

ProSeries Professional

Best answer by BobKamman

There was not a Schedule 1 in 2010. The 2025 instructions mention the Schedule 1. Based on both 2010 and 2025 instructions for Schedule C, I interpret that the "sporadic" spec home would not be reported on Schedule C. So, I am left with the quandary of reporting the profit on Schedule C with self-employment tax or reporting on Schedule 1 as ordinary income.

Any opinion on having substantiation for reporting on Schedule 1?

What do you think? Would IRS consider reporting on Schedule 1 a "frivolous" argument?

You are overthinking this. There is no new rule, "if you want to go into the home construction business, you get one free bite at the apple before you have to call it self-employment."

BobKamman

Level 15

Nothing has changed, at least since 1987 and the Supreme Court decision in the Groetzinger case. It's based on facts and circumstances. I did a search of Tax Court opinions with the words "sporadic" and "self-employment," and found 49 results from 1995 to 2026. I like anything Judge Holmes writes, so I looked at the Ryther case from 2016. Lucid as usual, but 22 pages so best enjoyed after April 15. There's also the 37-page Alhadi case from the same year.

I also searched the 2025 Pub 17 for the word "sporadic" and did not find it. Doesn't mean it's not there. Where are you looking? Or did AI tell you it's there?

It's unclear from your post whether this is the first house the guy built, or if he has done it sporadically in the past. In either case, I think it's difficult to call it just a casual short-term gain.

R

RBTAXMAN1Author

Level 3

BobKamman thank you for the thorough explanation! Here is the instruction from the 2025 Pub 17 concerning reporting income on Schedule C as a business. This is the first time my client has built a spec home.

Use Schedule C (Form 1040) to report income or (loss) from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity, a not-for-profit activity, or a hobby does not qualify as a business. To report income from a nonbusiness activity, see the Instructions for Schedule 1 (Form 1040), line 8j.

BobKamman

Level 15

That's weird, I do a word search for "Schedule C" on the online IRS PDF of Pub 17, and get 28 hits -- but not the language you quote. Do you have a page number?

Accountant-Man

Level 13

I understand all this discussion and the word sporadic, but the only time I have even considered not taxing for SE when someone actually did work was when an executor, who was not in the business of being an executor but more likely was a family member, received Executor's Fees.

Ordinary income NOT subject to SE.

If the TP worked at renovating and selling a home, then in my opinion it is a business, even a one time thing.

If, when I started my solo practice in 1992, I received income but then got a job (employee) in 1993, would my 1992 income be "sporadic?"

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