Posted by Nick on April 18, 2004 at 10:01:28:
Thank you
Lonnie Deals Tax Question - Posted by Nick
Posted by Nick on April 18, 2004 at 07:58:04:
OK when you buy a home for lets say 5K andsell it a week later for 10000 I understand that you pay fed capital gains on the full 5000 profit even though you will be recieving payments for 4-5 years. For me that would be about 1500 in taxes. Now 6 months later your buyer moves and gives you back the home. Now you resell it for another 10K. Does that mean I would pay another 1500 on the second sale also? If so most of your profit would be eaten up due to taxes. Or can you somehow recoup the initial tax amount paid?
Re: Lonnie Deals Tax Question - Posted by Howard Schwartz
Posted by Howard Schwartz on April 18, 2004 at 08:18:25:
The first part is correct. If you have a cost basis of $ 5000 and sell for $ 10,000 on a note, the $ 5000 gain is taxed in year 1, even though you receive only a part of the principal back that year. If you repo, let’s say that $ 200 principal was paid off before repo, your new cost basis will be $ 9,800 plus whatever costs to get the home ready for resale. Then you would report a gain or loss on the resale depending upon the new sale numbers.
Howard