Flipping is when you purchase a property with the intent to fix it up and sell it for a profit. This makes your property inventory just like apples in a fruit store (a fruit seller does not get to depreciate apples—they are COGS).

If you buy a property with the intent to sell it, no matter how long you hold it, you cannot depreciate it. You can’t do installment sales or a 10312 because it is inventory. Warning: There is so much rubbish on the internet about this subject; please beware.

If you are flipping, you are not doing accelerated depreciation, and your expenses get added to your basis. Never flip properties in your name—because it is confusing to the IRS. Flipping is a trade or business to the IRS, and if you take a loss, that’s classified as an ordinary loss—that can be written off against W-2 income.

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