Sub2 and Seller Taxes - Posted by Batman

Real Estate Investing
1

Posted by JR_FL on November 09, 2006 at 06:21:49:

When you buy the house. Taking it into your own trust (not doing an assignment of benificial interest)That is a sale. Period. Just report the interest income spent.

BTW, selling an interest into a personal property is considered a sale.

2

Sub2 and Seller Taxes - Posted by Batman

Posted by Batman on November 08, 2006 at 09:58:00:

I’m in the midst of negotiating a sub2 with a seller, and with tax time rolling around, I need to know how to explain the tax implications at a high level to a seller if they should ask. In my particular situation, the seller may be receving some cash at closing (less than $10K). I will be taking title using a land trust.

Thanks

3

Re: Sub2 and Seller Taxes - Posted by BTI

Posted by BTI on November 08, 2006 at 10:19:50:

Gee Willickers Batman

Robin says stay away from giving tax advice unless your a CPA. Always tell the other party your not a tax expert and they should ask their tax advisor. In fact that should be in a clause in your purchase contract.

That said, a seller selling sub2 is the same as any other sale, they have a selling price, adjusted for allowable selling expenses, less their basis in the property.

BTI

4

Whoa Nelly, wrong advice - Posted by LeasePurchase

Posted by LeasePurchase on November 08, 2006 at 14:35:34:

I agree with BTI, do not give any advice. Tell them to talk to their own Tax Advisor.

However, if you are taking the property Sub2 using a Land Trust, THERE IS NO SALE. All you are doing is acquiring an interest in the Sellers Trust. You will then purchase an Interet in their Trust with the money you mentioned, not an interest in the property.

There are no tax consequences until there is an actual sale of the property which may be months or years later. However, depending on where you are located there may be a transfer tax of the Title to the Trustee.