Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. 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.
Tax, SDIRAs & Cost Segregation
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 over 2 years ago on . Most recent reply

User Stats

254
Posts
273
Votes
Daniel Chang
  • Professional
  • Riverside, CA
273
Votes |
254
Posts

Installment Sale 2 months apart?

Daniel Chang
  • Professional
  • Riverside, CA
Posted

I do plan to talk to my tax advisor about this.  But this is crunch time tax season, and it's hard to get ahold of him.  Just wanted to see if anyone here as an idea so I can at least start brainstorming a little.

If I'm in escrow selling a property, and the close date is in November.  That is <2 months from a new fiscal year.  Does anyone know if it is allowed to do an installment sale (or seller's financing...both are the same thing essentially), where buyer pays half on closing and half 1/2/2023 (<2 months later)?  My thought was to split the tax hit over 2 years instead of one.  My reading of IRS regulations seem to allow it, but nothing is specifically mentioned about <2 months between payments as long as it crosses a new fiscal year.

(Yes I'm aware of other options such as 1031, DST's, etc etc. I'm exploring the "just take the tax hit" option.)

Most Popular Reply

User Stats

8,981
Posts
9,353
Votes
Dave Foster
#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
9,353
Votes |
8,981
Posts
Dave Foster
#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
Replied

@Daniel Chang, Kudos for thinking outside the box.  But there may be a better way that avoids some of the downside potentials that  @Michael Plaks rightfully noted.  Sell the property regularly and start a 1031 exchange.  Make sure to close your sale no earlier than 11/17/2022.  There is no penalty for starting and not completing a 1031 exchange.  So let it die by not turning in a 45 day identification form.  Your exchange will die on day 46.  Which will happen to fall in the 2023 tax year.

So when your accountant files your tax return for tax year 2022 they will actually report the 1031 exchange as an installment sale with all of the proceeds received in 2023.  This pushes your payment date to April of 2024.  Accomplishes everything you want.  But rather than the risk of an installment sale to an unknown 3rd party you only have to pay a small fee to set up a 1031.

  • Dave Foster
  • Loading replies...