Tax Help on Seller Financing deal

[Brendon Kerrigan]

Hi BP Community!

Trying to do my first seller financing deal and the owner is open to the idea, but has 1 concern that I didn't have an answer for off hand.  If I buy the property tomorrow, and the owner carries the mortgage, would he recognize the capital gains in 2020, therefore owe taxes by April?  Or would the capitals gains be recognized when I pay the amount in full, which would be sometime in the fall of 2021, therefore payout of taxes wouldn't occur til april 2022?

Also, this property is in a trust, are there any issues doing a seller financed deal within a trust?

Thank you!!!

[Bryce Wade]

Hi Brendan,

Tough question! I was looking into this as well. I believe (please back check this) that the capital gain is not realized until the seller receives the money over the amount of his basis. They might have to claim any interest porifts that they recieve from you though.