If you flip houses for profit, be aware you probably are a real estate dealer and not an investor.
This means you:
1. Treat all buying and selling expenses of houses as ordinary business expenses.
2. Treat all proceeds as business income
3. Are not subject to the $3000 capital loss deduction rule, but can deduct losses against ordinary income (and losses in excess of income can be carried back of forward as net operating losses).
4. Have to pay self employment tax on your net profit.
5. Can’t take long term income as capital gains.
6. Can’t use the installment method to record income from property sales.
7. Can’t take depreciation on property to be flipped.
8. Can’t use sec 1031 to defer gain in a like-kind exchange.
The key is to know whether being a dealer will be an advantage or a disadvantage. This will take some planning with your tax preparer (me for instance).