Dealing with the "Dealer" Issue
by William Bronchick
The capital gains, exchange rules and installment sales rules apply for properties held for "productive use." I.R.C. §1234. If you are actively buying and selling real estate on a regular basis, you may be considered a "dealer" in real estate properties. A dealer is one who buys with the intent of reselling rather than for investment. There is no magic formula for determining who is an investor and who is a dealer, but the IRS will balance a number of factors, (See, e.g., Winthrop, Ada Belle v. Tomlinson, 417 F.2d 905) such as:
The purpose for which the property was purchased
How long the property was held
The amount of sales by the taxpayer in that year
Amount of income from sales compared to taxpa...
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