Posted by Bud Branstetter on November 24, 2000 at 18:34:02:
The note may be subject to estate taxes if the estate is greater than the lifetime exemption(currently $675K). An owner financed note is subject to being taxed as an installment sale if so elected. The interest portion is regular income. A portion of the principle is the return of the basis in the property. The rest is the gain and added to income like the interest. Without knowing their situation I can’t comment on what is best for them. For the investor you always like owner financing because, eventually, the note holder will want cash rather than payments and you can get a discount.