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Loading ...How do I report an installment sale of 1/4 of a peice of land that I have financed also.?
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I purchased 4 lots for 35,000. Have it owner financed for 10 years @ 12%. I sold 1 lot for 15,400 and owner financed it for 10 years @13%. So, I profited 6,650 on the sale of the one lot over a period of 10 years, plus the difference in the 1% Interest difference. How do I report this on my taxes?
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Tags: 2 Responses to “How do I report an installment sale of 1/4 of a peice of land that I have financed also.?”
It sounds like you did an all inclusive deed of trust which is also called a land sale contract. You wrapped the underlying mortgage with your mortgage. The buyer is required to pay you and you turn around and pay the mortgage on the property you purchased.
If that is the case, you report the sale either as an installment sale and the gain is recognized pro rata as you collect the $15,400. Alternatively, you can opt out of installment treatment and report all of the gain in the year of sale.
You report interest income collected on your note (the full amount) and you report investment interest expense on schedule A for the interest you pay on the 1st note.
Jim Kirby, CPA/PFS, CFP
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You will report it as 2 different tax items. You will pay capital gains on sale of the lot and the second it will be the interest income. ( i will still check with a tax consultant)
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