Inventory or Rental Investment

[ILLMAS]

I have a new TP that create a partnership (1065) with his brother, they are buying houses, rehabing them and selling them, however the houses are not selling, so they are renting them. Since there business is to buy, fix and sell, can the properties be setup as inventory? And how would the rental income be classified if they are considered inventory? No hurries on the response, this baby is going on extentsion.

[michaelmars]

i would think once you start to rent them they are rental property and treated as such