Would a loss from converting to personal property be considered ordinary income?
A three member LLC purchases and renovates a two-family home with intent on flipping after renovation.
At the beginning of the next year(2018) we decided to convert one unit to personal use by renting to family member at below market rental rate. This resulted in a large negative amount ( practically half the cost of the home with renovations) reported as “ordinary business income” on schedule K-1. Should we exclude (delete) this K-1 because we stopped the “ordinary business” portion of one unit and continue to classify the other unit as “rental real estate” income? Need some direction on filing taxes correctly for 2018.
Hi Anthony! Maybe this article on capital gains vs ordinary income can help! https://fitsmallbusiness.com/taxes-on-flipping-houses/