Posted by Patt on December 20, 1999 at 17:42:47:
(NT)
Discounted Second - Posted by Patt
Posted by Patt on December 20, 1999 at 09:15:36:
Are there any tax liabilities for the grantor of a second lein that negotiates a steep discount buyout from the holder?
Are there any tax liabilities or tax advantages to the holder of the second that sells at a steep discount?
I greatly appreciate any knowledgeable replies.
Patt
Re: Discounted Second - Posted by Bud Branstetter
Posted by Bud Branstetter on December 20, 1999 at 12:40:22:
There are certain situations, though not common, where a seller of an owner held note could have a tax advantage in the current year by selling at a discount. If the seller had claimed all the profit in the year of sale instead of doing an installment sale then when he sells he can claim a loss. Sometimes if the discount is steep enough then even on an installment sale the basis of profit left on the note may be less than what it sells for. The seller has a liability if he sells the note because the profit(over his basis) that he made, and was doing an installment sale on, is then realized in the year of sale of the note. The buyer’s basis is the amount he paid for the note. Everything over that is interest.
The payor of the note is not effected and just keeps paying per the original terms. The