First Lease Option! Is 1 year long enough? - Posted by Philip

Posted by Philip on August 27, 2003 at 14:47:08:

I would be selling. I would have someone sign a 2 year lease with an option period from the 12-16th month.
Hopefully I would sell after 12 months and that would put the tax off a year, plus the “buyer” would gain a little equity in the mh, plus depreciation would kick in during the year it was leased.
I just wondered if the IRS would tax me the very first year because I didn’t “hold” the leased property long enough?
My attorney says that here in Missouri you may need to pay the taxes and insurance to keep from looking like a sale.
Why would that change from state to state? Is he just being safe? Or maybe he just doesn’t know about a triple-net lease?
Thanks,
Philip

First Lease Option! Is 1 year long enough? - Posted by Philip

Posted by Philip on August 26, 2003 at 16:34:48:

Before the option term kicks in?
Or will the IRS see this as a sale because of the short term lease?
Philip

Re: First Lease Option! Is 1 year long enough? - Posted by Tony-VA/NC

Posted by Tony-VA/NC on August 27, 2003 at 06:37:20:

I cannot comment on the tax implications directly but a few questions to clarify your post.

Are you buying or selling on this lease/option?

If you are buying, the longer the option the better, if you are selling, the shorter (in my opinion).

As far as I understand it, the option money is not considered yours until the option is exercised or expires. In your example, it would be taxed at the end of that first year. If you sell it then, it will be a sale. If you don’t and the option expires, then you are taxed on the option consideration.

Tony