Posted by Ernest Tew on February 11, 2004 at 06:24:16:
Michael, in recent years we have been helping people acquire their own parks by entering into joint ventures and providing financial backing. As a result, we no longer buy mobile homes in parks belonging to other people.
When we were purchasing homes in other parks, we were able to convince most park managers that there were good reasons to cooperate. For example:
If the park manager would contact us when a resident got behind on payments, we would offer to buy the home and catch up the back payments. If the home needed fix-up work, we would take care of it before offering it ‘for sale’ (under our net lease and option plan).
When we sell a home in the park, we would pay the manager a reasonable fee for their assistance ($200 to $500).
When a park resident decides to move and offers their home for sale, we would offer to buy it and leave it in the park, avoiding the possibility of another vacant lot.
All residents would be screened and approved by the park manager before moving in. The park would rent the lot to the resident and we would guarantee the lot rent.
Park occupancy becomes more stable because we don’t allow occupants to move the home out of the park until it is paid for.
When all the provisions in our net lease and option agreements are taken into account, the resident has the same rights and responsibilities as a buyer. They make a down payment (treated as option money consideration) and monthly payments, and pay for all maintenance and other costs.
While reviewing all the advantages to park owners and managers, use diplomacy and try to become friends with the manager. We explain to the park manager that we would quickly get into an income tax problem if we change the name on the title because all gains would be taxed in the year of sale–even though we collect over a period of years.
I am buying and selling mobile homes. My wife does not
participate in the business in any way. However her
name is on titles as lienholder along with mine. Also
the money for purchases and sales is handled through our joint account.
My question is this: Are my wife and I considered partners
in a partnership?
The reason I ask is because when I started doing my taxes
I noticed the instructions for Schedule C state “if you
and your spouse jointly own and operate a business and
share in the profits and losses,you are partners in a partnership,whether or not you have a partnership agreement.
Do not use Schedule C or C-EZ. Instead file form 1065”.
I thought I could file as a sole propritorship?
Posted by Ernest Tew on February 11, 2004 at 05:27:41:
From your comments, it appears that you and your wife are in a partnership. However, since partnerships aren’t required to pay income taxes, it won’t make any difference in the amount of taxes you and your wife will be required to pay, assuming you file jointly.
Filing a partnership simply provides the IRS with information and any taxable income is passed through to the partners. Whether or not the money is left in the partnership or distributed makes no difference.
You may encounter two other problems that are more important:
If you are buying and selling mobile homes in your name individually, you are running the risk of losing your assets by being sued for any reason.
Selling mobile homes on terms and being paid over several years could create a serious tax problem. Under IRS regulations, a dealer is anyone who buys and sells mobile homes for profit. Dealers are not entitled to installment reporting. This means that the entire gain on the sale of each mobile home would be taxed in the year of sale?even though the mobile home is financed over a period of years.
We solve the tax problems by entering into Net Lease agreements and Options To Buy. However, we must overcome the resistance we often get from park managers who have a policy of not allowing rental homes in their park.
If you would like to receive a copy of the Net Lease and Option Agreements that we use, please send me an email. Better yet, you may want to order a copy of How To Get Rich Helping Others. It shows you examples of how to solve such problems and provides all the business and legal forms for doing it yourself.
Re: Schedule C question - Posted by Michael (KCMO)
Posted by Michael (KCMO) on February 11, 2004 at 05:36:56:
Ernest,
I ordered “How to Get Rich Helping Others” some time ago and have a copy of your Net Lease and Option agreements. But as you mentioned, I’ve come across quite a bit of resistance from the park managers/owners due to the fact that they do not allow sub-leasing of their lots, which is technically what I’d be doing. I’m wondering if you could comment on the approach you use w/ the managers/owners to pursuade them to our way of thinking?
I appreciate your time.
Regards,
Michael (KCMO)
(Michael Stilfield)
P.S.
Just an FYI for anyone using these (or other) forms in MO. I met w/ my attorney yesterday after having had him review all the documents I’d been using. He made a few changes/suggestions but there is also some legal language that is required by MO law. Just thought I’d give anyone out there in MO a heads-up.
