Posted by William Bronchick on February 18, 2002 at 23:35:50:
Actually, the $1000 would be part of the price, unless you paid it AFTER the transfer of ownership, in which case you can try to argue that it is art of your taxable basis/acquisition cost.
Mobile Home Legalities and State Taxes - Posted by Kevin (MI)
Posted by Kevin (MI) on February 16, 2002 at 13:57:15:
Hi all,
Specific Mobile Home question, but wanted some legal opinions as well?
We just made our first Mobile Home deal and have just sold the mobile as well. The buyer bought the home for 14k with a 2k down payment and took the remainder 12k back as a note.
In Michigan, there is a 6% sales tax on the transfer of title of the purchase price of the home. This equates to $840 (14k x 6%) the buyers have to come up with at time of titling the home. I know this topic has been covered somewhat but I was wondering if anyone has ever experimented with this.
Not sure if this is even legal, but let me explain how we purchased the home. The sellers had nearly a $1,000 judgement against them from back lot rent and the PM. We agreed to buy their home for $4500 ($3500 to them and pay the $1000 judgement.) Since we were not dealers at the time, we titled the home in our name, but only claimed the purchase price of $3500 ? this is the price outlined in the agreement. This saved us $60 in taxes, but informally the purchase price was $4500 in total?
Some questions surrounding this:
Is what we did considered legal?
If OK to do, then can we expand on this idea by using this tactic for other homes. For example, we would like to purchase your home for $4000, but instead let us give $2000 for the home and pay off your $2000 credit card debt. Then claim only a $2000 purchase price with the State to limit our sales tax exposure (of course only an issue when we are not dealers ? this is in process for us)
Now the REAL question, we want to help our buyers out by limiting their tax exposure as well. If we signed the contract with them, stating a $14k purchase price, can we somehow make this number much smaller when titling by striking a barter deal or something of this nature?
Can we use the tax strategy we use for the federal government (i.e. John Hyre?s method of taking the fair market value of the note ? the A.C.N. fair market value ? and claim this as the purchase price to shield our buyers somewhat of the sales tax burden?)
We understand as sellers, this is not really our issue, it is the issue for the buyers. However, we feel we are in this business to help solve problems and in the process get compensated very well for it. We would like to keep ourselves covered legally if we ever have to repo the home, etc, but would like to get our relationship with our buyers off on the right foot. In the future, we will most likely offer to split the sales tax with the buyer as a sales tool, but just looking for some creative suggestions of ways to keep more money in our pockets!!!
Thanks
Re: Mobile Home Legalities and State Taxes - Posted by William Bronchick
Posted by William Bronchick on February 18, 2002 at 08:47:50:
Given that you’ve got two attys answering Q’s here for free, you are going to have to make the Q simpler and shorter, please.
Sorry about that… - Posted by Kevin (MI)
Posted by Kevin (MI) on February 18, 2002 at 17:50:56:
I should have known as I was rambling on…BTW, great book (Flipping Properties)…
Simply…
Anything wrong against bartering to keep sales price down on a Mobile Home sale? e.g. bought a home for $4500 ($3500 to seller, $1000 to pay off their judgement).
When titling the home, we claimed sales price of $3500 which limited our sales tax liability as non-dealers…
Thanks for the response…
Re: Sorry about that… - Posted by JHyre in Ohio
Posted by JHyre in Ohio on February 19, 2002 at 06:45:30:
What Bill said + when titling, I’d name the real price-which was $4500. Putting false info on legal documents is a bad idea, especially to save $50 to $80.
John Hyre