This is a must-read for investors. According to Dianne Kennedy, the IRS have three different definition about taxpayers
who buy, sell or hold real estate: real estate dealer aka flipper, real estate developer and real estate professional.
Here are the differences. Via Realty Times.
A real estate dealer is someone who is in the business of buying and selling real estate for short-term profits. A real estate dealer is known by other names: wholesaler, flipper, or rehab'er. Although the person gets the label of "real estate dealer," it's a decision that's made based on each property. It's possible to be a dealer on one property, but not on another.
........The second definition is real estate developer. A real estate developer is someone who renovates or changes the use of a property. It could be the person who buys an apartment building for a condo conversion, the developer who turns bare land into a trailer park or simply the person who buys a wrecked house and does extensive work before it's habitable.
.........The final classification is "real estate professional." Finally, we have an IRS definition that will put money in your pocket. A real estate professional is someone who is involved in real estate activities and owns 5 percent or more of his or her business.
There's more to it about how you'd be taxed according to the definition, here.
* When Is An Investor, Not An Investor? [Realty Times]
