Posted by Randy Jensen on March 27, 2001 at 24:09:05:
I have been doing some very profitable deals recently and was looking for some opinions on a tax deferral technique that I have thought up. I am no tax pro by any means, so I am interested in the legality.
Senario: I have a purchase that I am getting for $104K. Since I control all aspects of the transaction through a power of attorney and pre closing deed transfer, I structure it as a purchase money contract for $180K. I finance a new $175K loan, and create a lien payable to myself at closing for $71K. The purchase price shows $180K (it does appraise) and I walk at closing with a check for $71K, and the previous owner shows the sale at 180K for her 2 year primary residence non taxable sale. My money is non taxable untill I sell, and when I do I get a basis of 180K instead of 104K. Plus I dont get a 1099 so the transaction is only there if I want it to be. Yes I am honest and so I will pay taxes on it, but it is a loan so the funds are not taxable untill there is debt relief. Do any of you tax type guys see any holes in this operation?
It seems to pencil out pretty well, but we all know the devil is in the details.