Tax consequences. straight sale vs owne financing

[Bill Cippola]

WE are in the process of selling some land in Georgia we inherited back in 2014. We are Georgia residents. Without going into detail it was part of "gift" giving on a planned inheritance schedule below the max gift threshold at the time. Accountant we had back then is no longer around. We have a buyer for the land and they are asking to give us 20% down and that we hold the note for 5 years with a balloon at the end. Higher tax consequences by holding the note and taking payments vs just a straight sale?

Thanks

Bill

[Ashish Acharya]

Originally posted by @Bill Cippola:

WE are in the process of selling some land in Georgia we inherited back in 2014. We are Georgia residents. Without going into detail it was part of "gift" giving on a planned inheritance schedule below the max gift threshold at the time. Accountant we had back then is no longer around. We have a buyer for the land and they are asking to give us 20% down and that we hold the note for 5 years with a balloon at the end. Higher tax consequences by holding the note and taking payments vs just a straight sale?

Thanks

Bill

1) Seller financing will decrease your capital gain if you had a gain that was high enough to bump to the next cap gain tax bracket. So it really depends on your income level. If your income puts your cap gan in the 15% bracket and you are not on the edge, the straight sale is ok, unless you are subject to tax mentioned below. 

2) seller financing also helps you avoid 3.8% of NIIT tax, again, if you were in the higher tax brackets.