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Question 1: If I buy a house with owner financing and they name the price on my terms. How does capital gains work out for them. Say we agree at 1% interest at 20 or 30 years. When are they subject to the gain?
Question 2: If an owner wants to sell me a note are they subject to a capital gain? They wouldn’t sell property but rather the note secured by real estate.
Question 3: If someone wants only current retail price for their home but could use a little fast cash, can I offer them $1000 to for my right to buy their house after 2 years and before 5 years. Thus, I secure the option but my question is what if they change their mind or do something different before I can execute my option?
question 1 = if the property was a personal residence 2 of the last 5 years, then they owe no taxes up to $250,000 for a single person and $500,000 for a couple. IRC121
If this was not a personal residence, they would qualify for an installment sale and pay taxes on the money as they received it.
Question 2 – don’t know about note sale.
What I do know, if you make money, the US government wants a piece of it so they can distribute the wealth to people who won’t work
question 1 = if the property was a personal residence 2 of the last 5 years, then they owe no taxes up to $250,000 for a single person and $500,000 for a couple. IRC121
If this was not a personal residence, they would qualify for an installment sale and pay taxes on the money as they received it.
Question 2 – don’t know about note sale.
What I do know, if you make money, the US government wants a piece of it so they can distribute the wealth to people who won’t work
IRC Section 121 is a personal residence sellers savior for a house that has appreciated. However, should you or one of your sellers be audited, BEWARE as IRS agents may not know about Sect 121. Mine didn’t and neither did her supervisor. You (or better your CPA) will need to educate the IRS agent auditing you.
And, I didn’t wear any TEA Party memorabilia or Fair Tax shirts when I met with them either.
Hank… that’s so scary! They don’t know 1031 either!
When I had an audit, the guy said he’d never heard of buying with seller financing, let alone buying subject to the mortgage. He kept saying so, you assumed their loan. My tax attorney said no, she did not assume the loan.
After the audit, the guy asked if I could teach him some of that creative real estate stuff I did
NO!
He’s the same guy who would not delay the audit when I had to have eye surgery and had to lay face down for 3 weeks. So, my first audit visit, I had to keep my head down the whole time. I was not even suppose to ride in a car but I got someone to drive me to the audit.
Thank goodness I only had to be at one meeting. my tax attorney took care of the rest.
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