Posted by John Behle on March 14, 2000 at 14:29:47:
It’s a world of difference. If you trade a note, he has a gain as if he received cash. You will have a short term capital gain for the discount in the note. Possibly you could lower the price of both to compensate, but I think that could be questioned.
Besides, there is a simple easy way that has many advantages. If you buy a property and create new seller financing, it has the same tax advantages - no matter what the collateral is. You can’t trade a note for real estate. They are not like kind property and the note is considered “boot” and taxable as if it were cash.
In other words, whether his condo or the note you buy is collateral makes no difference. The key is that a new note - seller financing - is created, no matter what the collateral.
So, you take the same note that you would have traded and just use it as collateral. You own the note and create a new note secured by it. You collect payments and then pay the seller on your note. There are also MANY other advantages. I’ll pull an excerpt out of the Paper Game book so you can see some of them.