Posted by Steve H. on March 13, 1999 at 07:09:25:
The IRS will receive the sales price of $40,000. The seller will have to claim the total sales price, because that is what will be reported to the IRS. As far as the difference between the sales price and LTV of 80% I assume that would be a note the buyer would give the seller. Correct me if the assumption is incorrect. At any rate the seller pays the difference in the sells contract price + any improvements and what he/she paid for the property initially. Keep in mind the IRS receives the total contract sales price at close (most lending institution sales) and it will keep that amount on file to compare to the sales price reported on the tax return. If you are ever audited the IRS will look at the contract price less other expenses mentioned. Am I missing any information here?
Let me know.