Tax Obligations on a Seller Carryback

[Brian Salazar]

I am in process of selling my primary residence. With the change in the market it has been a much slower process. An opportunity has presented itself that’s a different approach, in which I would need to do a seller carry-back on a 3-5 year balloon. I have lived in the property eight years, so I wouldn’t have any tax obligation if I sold it outright. However, if I do a carry-back for three years, would I have a tax obligation on the principal payoff in 3-5 years when the note comes due? I know I would pay taxes on the interest payments, but am unsure about the principal down the road.