Posted by JHyre in Ohio on February 16, 2002 at 08:33:25:
From a tax standpoint, good thinking. There is some chance that the whole thing will be reclassed as a sale, because the lease effectively amortizes the true purchase price. BUT it’s hard for the IRS to catch and you do have an argument that the first three years are a “true lease”. From a businsess standpoint, I proffer the following:
Alot of the buyers I deal with would view the whole thing as rental…and trash the place and walk away. If you are dealing with “higher end” buyers, that may be less of a problem.
I prefer to change title up-front to avoid liability…low end MH buyers are sue-happy.
Alot of parks will not permit leasing of any sort.
Again, good tax planning. Business considerations make me less likely to use this structure, because I want my people to have a sense of ownership and full liability…so I use aggressive cash method of accounting to defer taxes. It’s a trade-off. But maybe you can have the best of both worlds with “higher class” buyers.