Sale of investment property (need help reporting)

[ILLMAS]

Crosia knitting buddies decided to buy a property, fix it, then sell it, everything was done in 5 months (bought, rehabbed, sold).  There was no deprecation taken nor deducted, I entered the information of Form 4797, and the gain is appearing on part II (Ordinary Gains and Losses) and flowing into the 1040 ln 14, it's been awhile since I had a case like this but I don't remember if it also has to flow to Sch D? 

Thanks

MAS

 

[Jack from Ohio]

It IS Ordinary Gain.  Short term and they are not in the business of rehabbing and selling properties.  Short term.  Does not belong on Sched D.  

[ILLMAS]

These whipper snappers buy investment properties for themselves (Rental units), just this time they bought it as a group, but they are in the real estate investment business.

[jklcpa]

Well, I went directly with your title where you called it investment property so I deleted my earlier answer.

[OldJack]

It is "investment property" not property subject to deprecation as it is not USED in a business operation.  Therefore it is not form 4797 rather form Sch-D.  There is no reason a person or business in the real estate business cannot have an "investment property" resulting in capital gain or loss. (ie; stocks, bonds, land, buildings, etc.)

[Lion EA]

Is it inventory of the partnership that was created to be in the business of buying and selling property?

[OldJack]

42 minutes ago, Lion EA said:

Is it inventory of the partnership that was created to be in the business of buying and selling property?

Explain taxes to the client, ask the client if it is investment property or inventory, (its not a tax preparer decision) the client will say investment as it probably must be sold before they can have money to do another.  It is possible for joint ownership in real estate without it being treated as a partnership.  The property is not being used in a business (not in condition for use and depr) so It is most likely not the intent of the parties to inventory the property.  As this property is not in use it is code sec. 1221 property, capital asset (Sch-D), and not business 1231, 1245, or 1250 (form 4797).