Hmm, if you carry a loan for the new owner is that part of the capital gain? Or only the actual payments in a given year?

 

People do it in NY on a daily basis.....(usually real estate investors)...and not, not the Donald Trump kind.

 

wouldn't the new owner be out $200k of trackable "equity" on the house though if they only did the legit part at XXX,XXX and excluded the $200k.

I would want the $200k in my basis if i were the new owner.


on a sidenote.....It does sound like the OP should have gotten the correct answer from Trojan....

 

thanks for the responses. Doesn't look like I'll be able to avoid the taxes because I did turn it into a rental, unless I move back in within 2 years. Won't be selling right now anyways, who wants to sell a place right before the holidays. Thanks


Heres the link that sent me down the path.... http://www.fool.com/school/taxes/1998/taxes980219.htm


edit, corrected the link

 

Depends. If you are investor, you dont want that money to be traced. The old owner is happy since he has 200K cash. As an investor, you avoid paying taxes on that 200K when you flip the house over. Thats why all the NY real estate people are making massive amounts of money. This usually applies only to speck houses though. For those that dont know what a speck house is, it is a house that looks like it was hit by a small nuclear bomb.

 

ya lost me..... the new owner wouldn't get to use that $200k as part of his basis.... I could see how the old owner would enjoy this set up.

when the new owner sells it for $1M (as an example) after paying $400k (but only recording $200k) he will pay cap gains on $800k instead of $600k....

I musta missed something?

 

Well, again, if he reinvests it, no taxes, PLUS, you can pay youself a salary, etc etc. If you really want to know the details, I can call my friend (who does this for a living) and shoot you a PM. He deals mainly with the not so well off minority crowd, who are very big fans of the under the table stuff.

 

i think I will pass.... I don't like getting gang sodomized.

 

If it's a rental, you can do a 1031 exchange and defer the tax until you sell the new property. Or you can defer that one, and on and on...
Of course if you want $ instead, you pay tax.

 

you guys are only talking about 2nd + residences, right?

in canada, there is no tax on gains from sale of your principal residence....as great as it may be....doesn't apply against cap gains either.

in other words, you don't have to declare any gain on principal residences.