Tax Court considers house flipper’s expense deductions

Description

Abstract: With many real estate markets on the rebound, real estate investors are resuming house-flipping strategies to reap profits by, among other benefits, deducting large amounts of related expenses. But those expenses are deductible only if incurred in connection with a “trade or business.” This article describes how a taxpayer in one recent case learned the hard way that a trade or business requires more than just vague intentions to sell at some point. And a sidebar notes that his use of a tax preparer didn’t provide him an escape from penalties. Ohana v. Commissioner, Nos. 16014-11, 25896-11, May 8, 2014 (U.S. Tax Court)