Installment Land Contract Tax Question - Posted by Joe

Posted by Randy on August 01, 2003 at 08:45:02:

NOT a CPA, their not creative enough. The interest you received is taxable income. The interest you paid is deductable. Depreciation is allowed if you owned the property most of the year. Beyond that You Need a Good Tax Consultant?

Installment Land Contract Tax Question - Posted by Joe

Posted by Joe on July 31, 2003 at 20:22:39:

In March 2003 I sold a property on an installment land contract. This was a first ILC for me and the buyer will be getting bank financing soon. I’m still not sure why the buyer didn’t take advantage of the extremely low rates as they both have great paying jobs ($95k/yr), great credit and no debt.

Here’s the facts and the question:
There is an underlying mortgage with a balance that closely mirrors the note that we wrote for the ILC. At the time of the sale I received $5000 down and fininaced the ILC for $107,000 at 9.5% for 26 years.
I know that the buyer will now get the mortgage interest write off but how does this transaction affect me. Do I count the entire interest portion of his payment to me as income? Am I able to counter this income against my interest expense? And can I continue to depreciate the asset?
Any insight or direction for me to get info is greatly appreciated!

Re: Installment Land Contract Tax Question - Posted by Shawn J. Dostie

Posted by Shawn J. Dostie on August 01, 2003 at 18:09:19:

Looks like you’ve got it pegged. You get the interest deduction, they get the interest deduction, the interest that they pay you is treated as interest income, not sure on the depreciation portion but you’ll either get the depreciation now and payit in capital gains when the refi or you won’t take any more depretiation now but won’t pay any more in capital gains when they cash you out(dep. portion only)