Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Buying & Selling Real Estate
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 4 years ago, 02/17/2021

User Stats

5
Posts
2
Votes
Matt Heider
  • Accountant
  • Lubbock, TX
2
Votes |
5
Posts

Zero Percent Financing & Taxes

Matt Heider
  • Accountant
  • Lubbock, TX
Posted

Full disclosure, I'm a CPA and this should not be construed as tax advice.  Please consult your personal CPA.

I did a search on this topic and didn't see much discussion, so I figured I'd chime in.  My wife and I are looking at a personal home that is specific to our wants & needs.  However, the seller doesn't like our offer.  So, I thought I would employ some of the "creative" financing strategies I've learned through BP, i.e. zero percent seller financing.  In researching this topic, I ran across §1274, which basically allows the IRS to impute interest income to the seller (based on the federal AFR rate) whether they charge interest or not on loans that exceed $250,000, or if is the sale of their personal residence.  

This had the potential to torpedo my plan since the home we're looking as is well over the $250k range.  BUT, I believe we can accomplish the same goal if we use the AFR rate as the mortgage rate, then start with the acceptable monthly payment and back into the "financed price".  Then add the down payment to arrive at total sale price.  To ensure the seller gets all of their money, put in a 100% prepayment penalty clause in the loan.  

Do any more learned members (especially other CPAs) have an idea if this could work?  Are there laws against prepayment penalties for private loans?

Thanks!

Loading replies...