Posted by David Alexander on January 16, 2000 at 12:21:35:
Accural basis means you report the income at the time of the sale and cash basis means basis means you report the income when you recieve the cash.
David Alexander
Did anybody get the detail on the tax situation for seller carrybacks? - Posted by chris
Posted by chris on January 15, 2000 at 22:30:43:
This was posted recently. Tax would be due up front for the full seller carryback amount if these posts were correct.
Any detail would be appreciated.
-Thanks, Chris
If you are asking about the thread started by Stacey (AZ) - message # 53956 - Posted by Chris (FL)
Posted by Chris (FL) on January 16, 2000 at 11:54:09:
I thought it was put to bed by Rick Vesole ( # 54225 ). Turns out Jen NE ( # 54683 ) has me curious again. I’d love to know what the real deal is on this one.
Tax - Posted by JPiper
Posted by JPiper on January 16, 2000 at 07:56:46:
Tax is due on the full sales price (including any seller carried financing) if you’re a dealer.
If you’re not a dealer, you may do an installment sale. This is discussed in detail below.
JPiper
Repost of my answer from down below - Posted by Rick Vesole
Posted by Rick Vesole on January 16, 2000 at 13:44:06:
The Taxpayer Refund and Relief Act of 1999 is HR 2488 that was vetoed by President Clinton in September.
Remember, that the House and Senate each had their own tax bills with different names and provisions. HR 2488 was called The Financial Freedom Act of 1999 when it was passed by the House. The Senate version (S 1429) was called The Taxpayer Refund Act of 1999. The proposal was renamed The Taxpayer Refund and Relief Act of 1999 when it was modified by the House/Senate Conference Committee (which retained the bill number HR 2488).
So, unless there was some subsequent legislation, this provision is not law. Nevertheless, this provision may be brought back up again in some future legislation.
However, remember that this proposed law was not directed at cash method taxpayers, only those that report on the accrual basis.
Re: If you are asking about the thread started by Stacey (AZ) - message # 53956 - Posted by JPiper
Posted by JPiper on January 16, 2000 at 13:14:48:
Turns out Jen (Ne) doesn’t have a message at this address. So where is her message, or what does it say?
JPiper
Also, dealer status…and reporting of seller carrybacks. - Posted by Matt
Posted by Matt on January 16, 2000 at 09:13:41:
I think it’s important to mention here, that Dealer status ONLY involves you if you are operating as a Sole-Proprietor (which is the worst thing to do).
First, let me say if you only sold a couple of properties with seller financing and you are NOT in the real estate business as a normal practice I would report these as an individual elect to report using the installment method.
If you are in the RE business and are using a corporation, you have NO choice on reporting and the “dealer status” is irrelevant. You report the profit in the calender or fiscal year of your entity when you sell the property.
Dealer status in only relevant if you are operating as a Sole Proprietor.
Use IRS Form 6252 to report an installment sale…here’s a
link:http://www.irs.gov/plain/forms_pubs/pubs/p53704.htm
Matt
Re: Repost of my answer from down below - Posted by Chris (FL)
Posted by Chris (FL) on January 16, 2000 at 14:26:54:
Let’s say an investor buys , then fixes up and L/Os the house for a couple years. Let’s say he then sells to the T/B by taking back paper… Let’s say this investor has a corporation for his dealer activities as well. The corporation wouldn’t hold this deal, would it? A LLC holding the benificial intrests would be better , no?.. What’s the tax situation on this kind of deal ?.. Would there be a change under the laws that were not passed , had they passed?
Same questons for a “wrap”.
correction - Posted by Chris (FL)
Posted by Chris (FL) on January 16, 2000 at 14:07:52:
The post’s correct # is 54863 not 54683.
Re: Also, dealer status…and reporting of seller carrybacks. - Posted by JPiper
Posted by JPiper on January 16, 2000 at 09:38:22:
Just so there is no confusion, I think it should be pointed out that not ALL corporations are necessarily dealers in real estate…and that corporations can and do sell property on an installment sale basis. I would say that the “dealer question” is just as important for a corporation as it is for an individual. But I would agree with you if you’re “in the business” using a corporation to buy/sell with.
JPiper
Clarification - Posted by Bronchick
Posted by Bronchick on January 16, 2000 at 11:50:59:
The new rule says that anyone who reports on an accrual basis (versus a cash basis) cannot use the installment method. As you pointed out, dealers cannot report on a cash basis, thus the rule really doesn’t change anything for us real estate investors.
Re: Clarification - Posted by tb
Posted by tb on January 16, 2000 at 18:08:32:
Mr. Bronchick,
By your statement, “The new rule says that anyone who reports on an accrual basis (versus a cash basis) cannot use the installment method.”, are you including C-Corporations? C-Corporations report on an accrual basis and sell using installment methods, were you referring to individuals?
Thanks a Million! tb
Re: Clarification - Posted by JPiper
Posted by JPiper on January 16, 2000 at 12:49:01:
My understanding was that this change was a part of HR 2488…and that it was vetoed by Clinton and therefore is not a part of the tax code yet. Is this not true?
JPiper
Re: Clarification for dummies - Posted by Chris (FL)
Posted by Chris (FL) on January 16, 2000 at 12:08:52:
Cash basis ? accural basis ? … I’m assuming that’s one cash payment vs many payments over time, respectively - correct ?
Will anything change from the motivated seller’s point of view?
Re: Clarification for dummies - Posted by JPiper
Posted by JPiper on January 16, 2000 at 12:31:17:
Chris:
Cash basis and accrual basis are methods of accounting.
Cash basis refers to a method where revenue is recognized when it is received in cash and expenses are recognized when they are disbursed in cash. No recognition is made for unearned, deferred, prepaid, or accrued items.
Accrual basis refers to a method where revenue is recognized when it is earned, and expenses are typically matched with revenues. No consideration is given to when the cash is received or disbursed.
I would imagination a full explanation of this would be given in most accounting books.
JPiper