title question - Posted by Joe P (VA)

Real Estate Investing Mobile Homes & Mobile Home Parks
#1

Posted by Kevin on February 19, 2002 at 12:28:21:

Hey Blane,
Check your email. I sent you that sites and information we spoke of earlier.

On this other issue, I am assuming you are not including any fix up costs or other expenses such as additional lot rent as your basis for the Costs of Goods Sold, so why could we not just include the other $1000 as a variable expense on our income statement and leave COGS at $3500?

I might be confusing a simple accounting issue with what is reported to the State. Nevertheless, I think we beat this issue to a pulp.

Thanks for the input and, if you can, please send me your white paper on the accounting for the sale of the mobile…

Once again, thanks for spending some time with us the other night. We closed on the deal and our buyer is very happy with the purchase…

Talk with you soon and BTW, Heineken’s for everyone!!!

#2

title question - Posted by Joe P (VA)

Posted by Joe P (VA) on February 17, 2002 at 20:57:17:

i feel silly asking this question, but im a beginner so i will… when i buy and sell a mobile home, do i initially put the title in my name, then when my buyer buys it, i transfer to buyers name and do i put the lien on it? how does this process actually work (the titling process)…any help would be appreciated…

#3

Re: title question - Posted by Tony-VA

Posted by Tony-VA on February 18, 2002 at 06:53:59:

Unless you have your VA dealers license, you will be unable to legally re-assign the title. Without this license, you would title the home in your name (or company name) and pay the sales tax on your purchase price. When you sell, you will title it in your buyer’s name, record your name (or company name) on the back as the lienholder. Your will pay the sales tax you have collected from your buyer’s (have them make the check out to DMV equal to 3%+ $20). DMV will reissue the title accordingly and give you, the lienholder, the title.

Best Wishes,

Tony

#4

Posted this before but… - Posted by Kevin (MI)

Posted by Kevin (MI) on February 18, 2002 at 17:55:03:

no responses…I believe due to the length…

Simply…

  1. Is there 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).

  2. When titling the home, we claimed sales price of $3500 which limited our sales tax liability as non-dealers…

  3. Does this negate the extra expenses as the basis or an expense at tax time?

We are becoming dealers, but in the meantime, would like to get creative about keeping costs down.

Thanks for any responses…

#5

Re: Posted this before but… - Posted by David (OH)

Posted by David (OH) on February 20, 2002 at 07:57:34:

Kevin,

Make sure that the $1000 is well documented as an expense to your business. You may save a few bucks in sales tax, but if you cannot add the $1000 into the basis of the home, you will pay much more with fed, state, local, and social security taxes on the $1000.

David

#6

Re: Posted this before but… - Posted by Tony-VA

Posted by Tony-VA on February 18, 2002 at 20:28:02:

I am by no means an accountant (I get ooky just saying the word “taxes”) so you may wish to address this question to John Hyre on the Legal Forum here.

My thoughts are:

  1. Bartering…Negotiating is the name of the game. The example you gave was not really bartering as I see it. You still paid $4,500 for the home as agreed, they just needed that $1,000 to get you a free and clear title/lot. This happens quite frequently.

  2. Not sure what you are asking here. If you actually paid $4,500 you would certainly want credit for that expense for taxes.

Perhaps this helps. On my “Lonnie” form, I simply go down the list of what is to be paid and to whom.

The total sales price= $4,500 less $1,000 for lot rent owed to park…balance of $3,500 to be paid to Seller at closing.

And to clarify…being licensed as a “Dealer” in your state (to sell mobile homes) is not the same as being classified as a “Dealer” by the IRS.

But again, I leave this to JHyre. In fact I believe he has a “How To Article” on this very topic.

Best Wishes,

Tony

#7

Re: Posted this before but… - Posted by Kevin

Posted by Kevin on February 19, 2002 at 11:43:57:

Tony,
Thanks for the thoughts on this. The whole meaning of the question was the “how we report the sale price to the State.” Great advice on listing all the costs being paid, etc. We, of course, included all of this with the purchase agreement…

IRS aside, (I hate that ‘T’ word as well), we were trying to avoid paying high sales tax when we bought the home by offering “other” methods of payment and leaving it out of the reported sales price to the State. This was the true question…sorry about the confusion.

Thanks again for your response. Your posts on this site are great and folks like you are making my initial experiences in this business extremely profitable.

If any of the veterans of this site are ever in the Detroit area, be sure to let me know, I’m buyin the beers…

#8

Already here, will still take the beer… - Posted by Blane (MI)

Posted by Blane (MI) on February 19, 2002 at 12:16:06:

Hey Kevin,

Methinks you would want to report the entire cost for 2 reasons: 1) clear conscience, in that you are reporting everything to the best of your ability, should anyone ever ask; 2) assuming for example you have an S corp. where everything flows to your 1040, even if you’re in the lowest tax bracket (15%) you’re better off reporting the whole thing, all things considered.

For example, if you reduce the cost of the home you and Cody bought by $1000, you’d save $60 sales tax but lose $150 of income tax reduction. I doubt you’d want to report $3500 to the state, and put $4500 on a federal tax return. Paying all that sales tax is a bummer, trust me I know, but you want to make sure everything’s straight should someone ever come knocking.

I’ll take a Busch Light or Heineken, thank you very much.

Blane