Any money you paid your family was taxed.

Sure, you avoid recapture because you had no depreciation to begin with.

Over the last 30 years or so I’ve had many, many clients come to me after having lost an audit because of their ‘expenses’ being overturned by a smiling IRS agent.

I’ve done many flips, both residential and commercial, and know from experience how far a taxpayer dares to go.

In my opinion I wouldn’t want to be audited after making that much profit while paying so little in taxes.

Still, way to go! Regardless of this discussion, you obviously kicked some major butt.

Flipping in San Diego is, at least for now, only for the experienced and very savvy folks — which is why you do well, Sam.

For those destine for Flipper Greatness, the ordinary income made as a dealer may help you Keep More money in the long run by structuring your business as an LLC.

As an S or C Corp. there several benefits that allow a dealer reduce their overall tax liability. LLCs, like Corps. have expenses…. for example; car allowances and fuel costs, strategic planning meetings at restaurants with your Board of Director (Spouse, Mom & Dad, Adult Children), travel cost, hotels, rental cars, meals. Not mention the salary the LLC pays you monthly to manage this “head ache!” 

But the biggest benefit can be the elimination or avoidance of the depreciation recapture. At some point all the depreciation will come back to TAX you.

Since I’ve discovered the wonderful world of LLC’s and Corps, life has been wonderfully tax free. In 2006 I sold an investment property for a net pre-tax gain of $127,000. After tax we kept $120,000.

I subsequently used that money to buy two other properties with having to carry over that depreciation.

That said, let me confuse it a tad more.

Earlier this month I wrote about a new change made in favor of vacation home owners, essentially allowing them to make use of tax deferred exchanges. Go figure.

Here’s the link:

http://www.bawldguy.com/irs-finally-addresses-vacation-homes-via-ruling-ok-for-1031-exchanges/

It’s always cool to hear people are speaking well of you in far away places. Thanks so much for letting me know.

And don’t be a stranger.

By the way, your name and blog came up at the RETechSouth conference today in Atlanta, the panelists gave you some well deserved compliments.