Will Wholesaling Make You a Dealer? | Article by Al Aiello

Wholesaling is quickly selling a property “as is” with little or no fix-up. Many times the entrepreneur never goes to settlement and will just assign (or “flip”) the agreement of sale to their buyer for a quick profit. Wholesaling can be a lucrative cash-profit business. But will it make you a “dealer”? That all depends, but first some background. Being tagged as a dealer could be a financial disaster because, unlike an “investor”, you are subject to the highest ordinary income tax rates, plus Social Security taxes, other employment taxes and possibly alternative minimum taxes. Thus, 50% or more of your hard earned profits could be drained by taxes. Moreover, dealer profits (cash or paper) are immediately taxed in full and cannot be tax-deferred in any way including not being able to use a 1031 exchange, installment sale reporting, a self-directed IRA... (read full article)