Basic Owner Finance Questions

[Curtis C.]

Just a few basic questions:

1. When you sell a owner financed house, technically, by law your supposed to pay taxes on it. You just sold that house thats worth 120k. But you only put 75k total into it. As far as the government is concerned you just made that full 120k and they are going to try and tax you on it. How do you prevent this from happening?

2. Is there a right of redemption period if you have to foreclose on someone?

Also please add in any additional pitfalls to owner financing a house I might not be aware of.

Thanks