FORM 1099-S

[rastewu]

I received a FORM 1099-S -Proceeds From Real Estate Transactions- from a client. This is in reference to a house he bought and sold for profit(Not his personal residence). Any help on where to enter this in proseries including all expenses made?

Your help is appreciated.

Thanks

[Just-Lisa-Now-]

Was this a one and done, or is he going to be buying and flipping houses on a regular basis?

If this was a one time thing, use Sch D.

If this is going to be an ongoing thing, you may be looking at a Sch C for business.

[rastewu]

What is the advantages or filing Schd C vs Schd D?. Also which section on Schedule C do you enter this information? I don't see anything like 1099-S.

[qbteachmt]

It's not an issue of advantage for which form to use. It's an issue of Facts and Circumstances.

Sched C = they are going to be doing this as a business or side business.

Sched D = they did it once, such as bought a house for themselves, but got an offer and sold it instead of keeping it = investment.

And what you have is not Expenses, These costs are part of basis = invested in the property sold.

If you have ongoing operational expenses (not directly related to what they bought, improved, and sold), they likely are running a business = Sched C.

[Just-Lisa-Now-]

Don't focus on the form and where to enter it, you need to assess the situation and decide how to report the transaction.  You'll have a 1099S, but you should also have 2 sets of closing documents, 1 from when they bought the house and 1 from when they sold it.

What was the clients intent when they bought the house?  Was it a house they bought as a vacation home or second home and decided to sell it?  Did they rent it out at all during the time they owned it?

Was the intent to fix it up and flip it? if so, do they plan to buy another house with the proceeds from this sale and then flip it?

[rastewu]

Thanks for your help on this issue.

The client's intent when they bought the house was to fix and flip it for profit.  They never rented it out at all during the time they owned it. Also they plan to buy another house with proceeds from the earlier sale and flip again.

[Just-Lisa-Now- · Accepted solution]

Sounds like Sch C, this can be quite complex if youre not familiar with it, be sure to do your research, Im sure theres tons of info out there about this.

[BobKamman]

Those are all good questions but I'm left wondering how long the taxpayer owned the house.   Five weeks, five months or five years?  

The choice between Schedules C and D shouldn't depend on length of ownership, but at least if it's less than a year you don't have to worry about lower capital-gain rates.  

Schedule C is also useful when losing more than $3,000 on these deals, which many money-pit investors find themselves falling into eventually.  

[rastewu]

Thanks so much for your help.

[rastewu]

He owned the house for less than 1 year.