Posted by Dave T on February 24, 2000 at 16:42:08:
For your example, imputed interest would not apply. Buyers and sellers may manipulate the tax consequences of an installment sale by varying the interest rate in seller financed transactions. By decreasing the interest rate and increasing the sales price of depreciable property, the seller decreases the interest income and increases capital gain.
The buyer normally will not care because all this does is decrease his interest expense and increase his depreciation expense.
The IRS has limited this tax plan with the imputed interest rules (Section 483) by imputing an interest rate in the sales contract unless a statutorially set minimum rate of interest is expressed in the agreement.
Contract for deed / minimum % rate. - Posted by Corey (ND)
Posted by Corey (ND) on February 23, 2000 at 20:01:29:
I recently found out that here in North Dakota there is a minimum % rate that the seller has to charge the buyer. I am not sure of what it is. Is anyone else familar with similar laws in other states?
Posted by Dave T on February 23, 2000 at 23:15:52:
Could the law to which you refer be a part of the state income tax code in that in the absence of a stated interest rate on a contract for deed or in the event of a stated rate that is substantially below market rates, the tax code sets an imputed interest rate that will be construed as income to the seller and thus taxable income?