Investor · Cincinnati, OH · Member since 2016 · 4 posts · 0 votes
i am a retired teacher. I use Turbo Tax. In January 2016, I purchased a four family apartment building here in Cincinnati for $100k. It was completely rehabbed with an additional $150k. The total investment of $250k came from my savings. The original idea was to fix up the units and rent them, but I have abandoned that idea. The contractor who did most of the work has approached me with the idea of selling the building to him on a land contract. If I sold him the building on a land contract for $250k, which is exactly what I have in it, on a 15 year payout, am I correct that the sale would result in a wash, no earnings to be taxed on, and the only taxes I will pay will be on the interest portion of the monthly payments for the next 15 years. And if he refinances at a later date and pays off the contract, that sale would not be subject to any taxes since it was listed for this tax year. Seems simple enough to me, but with the IRS I'm not quite sure. Thanks for any help.
Gardiner, ME · Member since 2015 · 190 posts · 177 votes
10y
I'm going to amend my reply. It sounds like you could be in my family and are willing to not get a good deal just so you can cheap out on taxes? My sister does not declare depreciation on her rental because she is "as good or better at filling out the taxes as most CPAs" and "the government always gets paid." This despite it being worth less still than they paid.
A good CPA should save you more than you spend.
Investor · Cincinnati, OH · Member since 2016 · 4 posts · 0 votes
10y
I am looking for a local CPA. To clarify a bit. I did put the property on the market for $275k and have an offer of $230k. Less commissions and closing costs, net is around $212k. If I'm right about paying no tax on a land contract for an amount exactly what I paid plus all improvements, then I'd rather do that than take the hit on the sale. I only have this weekend to really make a decision...to say no to the lower offer. The land contact can wait a few weeks until I talk to a CPA, but I just wanted an idea. Thanks
Real Estate Agent · Cincinnati, OH · Member since 2015 · 156 posts · 42 votes
10y
Following, interested in this tax talk haha. Also, somewhat interested in the 4 unit. Is it in Cincinnati proper? Did you get it tax abated? Thanks for any additional info.
Investor · Cincinnati, OH · Member since 2014 · 97 posts · 27 votes
10y
I am not a CPA but I play one on TV... I do have a finance background, do my own taxes for the portfolio we have and believe I understand the fact set. You are doing an installment sale but at no profit. If you sold at a profit, you could defer the gain if payments came over time. In your case, I believe you are correct in that you would only recognize the interest income. Hopefully you are charging a high enough interest rate to at least make this leaning endeavor somewhat worthwhile. In a backhanded compliment kind of way, at least you are exiting. I would make sure you button up the sale docs and ensure that you are not only secured on the sale but make sure that your docs give you an opportunity to monitor the continued conditions of the building. There are too many contractors, and others, who cannot manage and would easily walk away after trashing YOUR building. Remember, it is NEVER over until it is over and you have a long way to go and a lot invested in this. Good luck.
Following, interested in this tax talk haha. Also, somewhat interested in the 4 unit. Is it in Cincinnati proper? Did you get it tax abated? Thanks for any additional info.
Yes, Cincinnati...Westside. I have met with the Board of Revisions to get the tax basis reduced for the past, current and next year. I'm not sure how long the tax rate will stay low. I have the forms for tax abatement from the City, but have not started those (should have been done before this started).