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Subject Author Date
When report sale?? Vic Dura 03-09-2008
Posted by Vic Dura on March 9, 2008, 4:30 pm
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 Background:

Taxpayer A owns half of a house (tenants in common) with Brother B.
Brother B has lived in the house as his primary residence for many
years; TP A has not live in the house for many years. B would like to
purchase A's interest in the house for a promissory note at market
interest, such note principal and all accrued interest due when and if
B sells house. That may be in the near or distant future. The note
would be recorded as a lien against the house.

Question:

Would taxpayer A report the sale of the house 1) when the note is
recorded and the transfer to B occurs; or 2) when the principal and
interest of the note are paid after B sells the house?

The TP is hoping (1) is the answer so that he will have the money to
pay the taxes from the proceeds of the sale.

Thanks for any comments.
--
At first they laugh at you, then they ignore you, then they fight you, then you
win.

--
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Posted by Alan on March 9, 2008, 5:45 pm
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 Vic Dura wrote:
> Background:
>
> Taxpayer A owns half of a house (tenants in common) with Brother B.
> Brother B has lived in the house as his primary residence for many
> years; TP A has not live in the house for many years. B would like to
> purchase A's interest in the house for a promissory note at market
> interest, such note principal and all accrued interest due when and if
> B sells house. That may be in the near or distant future. The note
> would be recorded as a lien against the house.
>
> Question:
>
> Would taxpayer A report the sale of the house 1) when the note is
> recorded and the transfer to B occurs; or 2) when the principal and
> interest of the note are paid after B sells the house?
>
> The TP is hoping (1) is the answer so that he will have the money to
> pay the taxes from the proceeds of the sale.
>
> Thanks for any comments.
When title passes from A to B, A is considered to have sold the
house to B.

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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Ira Smilovitz on March 9, 2008, 10:02 pm
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> Background:
>
> Taxpayer A owns half of a house (tenants in common) with Brother B.
> Brother B has lived in the house as his primary residence for many
> years; TP A has not live in the house for many years. B would like to
> purchase A's interest in the house for a promissory note at market
> interest, such note principal and all accrued interest due when and if
> B sells house. That may be in the near or distant future. The note
> would be recorded as a lien against the house.
>
> Question:
>
> Would taxpayer A report the sale of the house 1) when the note is
> recorded and the transfer to B occurs; or 2) when the principal and
> interest of the note are paid after B sells the house?
>
> The TP is hoping (1) is the answer so that he will have the money to
> pay the taxes from the proceeds of the sale.
>
> Thanks for any comments.

Although the sale is reported when the transfer occurs, the seller has the
option of reporting the sale as an installment sale. Taxes would only be due
as funds are transferred from buyer to seller.

Ira Smilovitz

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Vic Dura on March 11, 2008, 8:56 am
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Re Re: When report sale??:

>> Background:
>>
>> Taxpayer A owns half of a house (tenants in common) with Brother B.
>> Brother B has lived in the house as his primary residence for many
>> years; TP A has not live in the house for many years. B would like to
>> purchase A's interest in the house for a promissory note at market
>> interest, such note principal and all accrued interest due when and if
>> B sells house. That may be in the near or distant future. The note
>> would be recorded as a lien against the house.
>>
>> Question:
>>
>> Would taxpayer A report the sale of the house 1) when the note is
>> recorded and the transfer to B occurs; or 2) when the principal and
>> interest of the note are paid after B sells the house?
>>
>> The TP is hoping (1) is the answer so that he will have the money to
>> pay the taxes from the proceeds of the sale.
>>
>> Thanks for any comments.
>
>Although the sale is reported when the transfer occurs, the seller has the
>option of reporting the sale as an installment sale. Taxes would only be due
>as funds are transferred from buyer to seller.

Thanks to all for the comments, particularly Ira and Seth. It looks
like an installment sale is the way to go.

One further question:

I assume the closing attorney would send a 1099 to the installment
sales contract seller and the seller reports the installment sale on
Form 6252. Is reporting the sale on the Form 6252 sufficient to
account for the 1099 received, or does it need to also be reported
someplace else?

Thanks for any comments.

Vic
--
To email me directly, remove CLUTTER.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Seth on March 10, 2008, 2:07 am
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>Taxpayer A owns half of a house (tenants in common) with Brother B.
>Brother B has lived in the house as his primary residence for many
>years; TP A has not live in the house for many years. B would like to
>purchase A's interest in the house for a promissory note at market
>interest, such note principal and all accrued interest due when and if
>B sells house. That may be in the near or distant future. The note
>would be recorded as a lien against the house.
>
>Question:
>
>Would taxpayer A report the sale of the house 1) when the note is
>recorded and the transfer to B occurs; or 2) when the principal and
>interest of the note are paid after B sells the house?

By treating it as an installment sale, the income is taxed when
received.

However, I'm not sure about the interest; that might be taxable to A
when accrued.

Seth

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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