owner finincing- estate planning - Posted by Kevin Subbert

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.

owner finincing- estate planning - Posted by Kevin Subbert

Posted by Kevin Subbert on November 23, 2000 at 23:21:46:

OK here is the scenario.

Seller agrees to carry 100% of the financing. Seller is old. Seller wants to leave the note with his daughter when he dies.

Is the note subject to estate taxes? If so how and when are the taxes paid? As the payments come in or a lump sum? Is the principle subject to estate tax and the interest considered income tax? I have no clue.

Thanks
Kevin Subbert