Taxes and an installment sale - Posted by Philip

import · February 19, 2003, 10:08am

Posted by Philip on February 20, 2003 at 05:33:20:

I was hoping someone would tell me differently!

import · February 19, 2003, 10:08am

Posted by Philip on February 19, 2003 at 11:08:49:

Why wouldn’t a person be able to only be taxed as an installment sale?
sale=11,000
loan=10,000
my purchase price=5000
profit=5000

Why couldn’t that $5000.00 only be taxed along with the interest AS it is recovered? Say over 48 months? or whatever?

Why would you get taxed all in the sales year, if you are recovering over 4 years?

I don’t understand.

Philip

import · February 19, 2003, 2:02pm

Dealer Status - Posted by Tony-VA

Posted by Tony-VA on February 19, 2003 at 15:02:19:

Aside from the issue of being licensed as a “mobile home dealer”, there is an unrelated tax treatment known as “dealer status”.

Hyre has a “How to Article” here that delves into this topic.

The IRS does not allow those of us who are treated with “dealer status” to ultilize the installment sale.

Hyre’s course does employ legitimate means to minimize this penalty.

Tony-VA

import · February 19, 2003, 2:07pm

Does each state define dealer? - Posted by Philip

Posted by Philip on February 19, 2003 at 15:07:57:

In Missouri I wonder if just a few homes per year is dealer or not. Also, why wouldn’t we be investors? Because we buy and re-sell?
Thanks
Philip

import · February 19, 2003, 2:15pm

2 Different Issues - Posted by Tony-VA

Posted by Tony-VA on February 19, 2003 at 15:15:50:

Just to be clear.

There are two different issues.

Mobile Home Dealer license restrictions imposed by each state (and they do vary).
Even if you are not a dealer but you buy with the intent to sell, you may be considered by the IRS for “Dealer Status” treatment. Read Hyre’s article here as I am not someone to speak with authority on tax issues by an means. I can only state what I have run into.

In a nut shell, investors are treated with dealer status when they are buying and selling. You do not have to be licensed as a “dealer” to be treated as such by the IRS.

Tony-VA

import · February 19, 2003, 8:04pm

Re: 2 Different Issues - Posted by KenS (WV)

Posted by KenS (WV) on February 19, 2003 at 21:04:07:

The way the IRS views this deal is as if it happened in two separate transactions. First you sold a home. You made $5K.

Second, you financed a home. You earn interest income on the loan and pay taxes on that as you receive the interest.

The first transaction is where the tax liability was incurred. You could have chosen to have a third party finance company finance the transaction and you would have received all of your cash up front. Just because you simultaneously owner financed the property, the IRS doesn’t see that as their problem.

Seems they just think differently than we want them to.

Good luck,
Ken