Taxes on SS income
Okay, here's a question I'm sure will make me look even more novice than before: 
Say you receive $10k in profits from a short sale, is that considered capital gains, or business income, or what?
Andrew
Okay, here's a question I'm sure will make me look even more novice than before:
Say you receive $10k in profits from a short sale, is that considered capital gains, or business income, or what?
Andrew
i would like to know the answer to this question as well. i believe it would be treated similar to a flipped property, since that is in essence what is taking place, with a more abbreviated time frame. i have been unable to find this topic addressed anywhere else on the web, so i hope someone will answer it here...
Andrew:
is capped at 20%. If you purchased the property after January 1, 2002 and hold the property for at least 5 years, then the LTCG rate is capped at 18%.
It depends on whether you do a significant number of real estate deals each year such that you are considered to be in a trade or business. If you only do a couple of deals a year and the substantial portion of your money that you live on is earned from a different job unrelated to real estate, then you are probably not in a business.
If you are in a business, the income earned on a completed short sale is ordinary income and would be subject to self employment taxes. (If the short sale is done through a single member LLC, all of the income earned by the LLC is subject to self-employment taxes; if earned by an S corporation, then the wages you pay yourself is subject to FICA taxes).
If you are not considered in a business, the short sale proceeds is probably short term capital gains since you have not held the property for at least 1 year. Short term capital gains is taxed as the same tax rates as ordinary income (i.e., federal rates up to 38.6%). Note: If you hold investment property (i.e., are not in a business) for tax least 1 year and sell such investment property, the federal long term capital gains rate ("LTCG"
Hope that helps,
Taxjunkie