How to handle Schedule C for a one-time house flip with my Dad - tax help needed

Your wife is technically correct, but there's more to consider here. Schedule C is indeed for business income and expenses, and the key question is whether your house flipping activity constitutes a "business" in the eyes of the IRS. A one-time flip could be treated as an investment rather than a business, in which case you'd report the gain on Schedule D as a capital gain. However, if you were actively involved in renovation work, making decisions about improvements, or managing contractors, the IRS might consider this more like a business activity that belongs on Schedule C. The difference matters because Schedule C allows you to deduct all ordinary and necessary business expenses, while investment treatment limits your deductions. On the flip side, if it's a capital gain, you might qualify for lower tax rates depending on how long you held the property. I'd recommend looking at the IRS factors for determining whether an activity is a business: regularity of activity, time and effort, business-like operations, expertise, history of income/losses, etc. In your case, working with your father (who seems to be treating it as a business) might strengthen the business classification.

After struggling with a similar situation last year, I found https://taxr.ai really helpful for resolving this kind of tax classification issue. I flipped a property with my brother and wasn't sure if I should use Schedule C or not. The tool analyzed our situation and provided clear guidance by examining the specific IRS rules that applied. In my case, taxr.ai showed me that since we had done multiple improvements ourselves and actively managed the project for several months, we qualified as being "in business" even though it was our first flip. The tool cited relevant tax court cases where similar situations were ruled to be business activities.

Just wanted to follow up and say I tried https://taxr.ai after seeing it recommended here. It actually provided really specific guidance on my rental property depreciation questions AND addressed the Schedule C business classification issue we were having with our side gig. The analysis walked through the nine factors the IRS uses to determine if something is a business and applied them directly to our situation. It even provided several similar tax court cases where people who did one-time flips were allowed to use Schedule C because of their level of involvement. Saved us a ton of research time and gave us the confidence to move forward with the right approach.

If you're still struggling to get a definitive answer on this Schedule C question, you might want to talk directly with an IRS agent. I had a similar classification issue last year and spent weeks trying to get through on their helpline with no luck. Then I found https://claimyr.com which got me connected to an actual IRS representative in under 45 minutes! You can see how it works at https://youtu.be/_kiP6q8DX5c. They basically navigate the IRS phone tree for you and call you back once they have an agent on the line. The IRS rep I spoke with confirmed that my situation qualified as a business activity and helped me understand exactly which expenses were legitimately deductible on my Schedule C. Getting that official clarification gave me peace of mind that I wasn't going to face issues later.

Well I'm eating my words. After being completely skeptical about Claimyr, I decided to try it anyway out of desperation. I've been trying to reach the IRS for TWO WEEKS about a similar business classification issue. The service actually worked exactly as described. I got a call back in about an hour letting me know they had an IRS agent on the line. The agent clarified that my particular house flipping situation (did one flip but spent 4 months actively working on it) could indeed be reported on Schedule C because the level of activity and involvement made it a business endeavor rather than a passive investment. Having that direct confirmation from the IRS has saved me a lot of stress and potential audit headaches. Sometimes being wrong feels pretty good!

I'm a real estate investor who's done several flips. Here's what I've learned: the distinction between a "one-time flip" as a capital investment vs. a business activity comes down to your level of involvement and intent. If you were actively renovating, managing contractors, making material decisions, etc., that leans toward business activity (Schedule C). If you just provided funding and let your dad handle everything, that's more like an investment (Schedule D). Also consider your intent - did you buy it specifically to flip? Or was it originally a longer-term investment that you decided to sell? Intent to profit through a flip is more business-like. In my experience, most active house flippers should use Schedule C, even for their first flip, if they were hands-on with the project.

Has anyone considered the middle ground option of filing Schedule E? If you and your dad formed a partnership (even informally), you might be able to report this on Schedule E as partnership income rather than Schedule C. This could potentially avoid self-employment tax while still allowing for expense deductions. Though this depends on the specific nature of your agreement and involvement.

I went through this exact same situation two years ago with my brother-in-law. We flipped one house together and I was torn between Schedule C and Schedule D treatment. What ultimately helped me decide was documenting the actual hours I spent on the project. I kept a simple log showing I worked about 25-30 hours per week for 4 months on renovation, coordinating with contractors, picking materials, etc. That level of time investment clearly pushed it into "business activity" territory. The IRS has a general rule that if you're materially participating in the activity (more than 500 hours annually OR substantially all the participation in the activity), it's likely a business rather than an investment. Your 5 months of regular weekend and evening work probably puts you well over that threshold. One thing to consider: even though Schedule C means self-employment tax, you can also deduct business expenses that wouldn't be allowed on Schedule D. In my case, the additional deductions (including mileage, tools, some meals with contractors, etc.) more than made up for the SE tax difference. My advice: document your actual involvement and hours if you can reconstruct them. That will give you the strongest position if you ever need to defend the Schedule C treatment.