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Whether it be a house or mobile home I read a lot about buying for 40K and selling for 70K. Getting a down payment and also monthly cash flow. The IRS is going to tax the entire 30K spread even though it is an installment sale which will result in probabaly owing money on this transaction even after getting a down payment and all the cash flow for the first year.Any thoughts out there?
With an installment sale, you are only taxes on the money you actually received. So, if you sold with seller finaning in the scenario you described, and you got $5,000 total in a year then that is what you’d pay taxes on ( MINUS EXPENSES AND ANY REPAIR COSTS OF COURSE)
you can also sell at your strike price then keep back on option for all the upside and you pay ZERO TAXES
After talking to Gary Johnston, Danny Williams, John Groom, David Phelps and my CPA they all agreed that if I buy it and sell it, even if it is an installemt sale, the sale will be considered by the IRS as a dealer transcation subject to being taxed on the entire unrealized gain. To answer my original question I will need to stay in title for a year to avoid this tax.
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