Real Estate transaction tax question

[Cindy He]

Hi all,

I have some newbie real estate tax questions.

We're getting a private loan from parents to purchase a flip. 

They're going to wire money directly into my LLC checking account. I'm just wondering what I do at the time of sale to prove I'm need to pay them back with interest, so I don't end up paying tax on the full sale amount? Will title take care of that for me? Do I still need to send 1099-INT? Also if I pay contractor at closing from title, do I still need to file 1099-MISC?

Thank you,

Cindy

[Christopher Phillips]

@Cindy He

Capital gains aren't based on loans. They are based on the difference between what you bought the property for and what you sell it for. Doesn't matter if you paid cash or borrowed the money.

Speak with a tax professional about your plans to minimize your potential taxes.