If a Musi is engaged in the real estate business and regularly “flips” houses as investments rather than holding them long-term, how is Wasiyyat calculated?

A house-flipping business is treated as an investment. When a Musi purchases a property for the purpose of renovating and reselling it, the investment is subject to Hissa Jaidad. The Musi may fulfill this obligation either at the time the property is purchased, based on the purchase price, or at the time it is sold, based on the net sale proceeds.

Any profit realized from the sale is treated as income and is subject to Hissa Amad at the Musi’s approved Wasiyyat rate.

If the Musi chooses to pay Hissa Jaidad when the property is sold, it is calculated on the net sale proceeds, which include both the original investment and the realized profit. Once Hissa Jaidad has been paid on those proceeds, the remaining amount may be reinvested. If the sale proceeds are used toward another house-flipping project, the amount already subject to Hissa Jaidad is credited against the new investment, and Hissa Jaidad is payable only on any additional funds contributed.

Example

A Musi invests $40,000 in a house-flipping project but does not pay Hissa Jaidad at the time of purchase. After the property is renovated and sold, the Musi receives $60,000, consisting of the original $40,000 investment and a $20,000 profit.

The Musi pays $6,000 as Hissa Jaidad on the $60,000 received from the sale. The realized profit of $20,000 is also subject to Hissa Amad at the Musi’s approved Wasiyyat rate.

The Musi then reinvests the remaining $54,000 from the first project and contributes an additional $16,000, making a total investment of $70,000 in a second house-flipping project. This investment generates a $30,000 profit, resulting in total sale proceeds of $100,000.

Since Hissa Jaidad has already been paid on the $54,000 carried forward from the first project, that amount is credited against the $100,000 sale proceeds of the second project. Hissa Jaidad is therefore payable only on the additional $46,000, resulting in a payment of $4,600. Hissa Amad is then payable on the $30,000 profit at the Musi’s approved Wasiyyat rate.