All Forum Posts by: Matt Heider

Thanks Dominic. To me the wording looks like it would be defined personal residence on the seller’s end. I guess I left out an important fact that the sellers are currently renting out the property and I’m not sure if they’ve lived there 2 out of the last 5 years.

Full disclosure, I'm a CPA and this should not be construed as tax advice.  Please consult your personal CPA.

I did a search on this topic and didn't see much discussion, so I figured I'd chime in.  My wife and I are looking at a personal home that is specific to our wants & needs.  However, the seller doesn't like our offer.  So, I thought I would employ some of the "creative" financing strategies I've learned through BP, i.e. zero percent seller financing.  In researching this topic, I ran across §1274, which basically allows the IRS to impute interest income to the seller (based on the federal AFR rate) whether they charge interest or not on loans that exceed $250,000, or if is the sale of their personal residence.  

This had the potential to torpedo my plan since the home we're looking as is well over the $250k range.  BUT, I believe we can accomplish the same goal if we use the AFR rate as the mortgage rate, then start with the acceptable monthly payment and back into the "financed price".  Then add the down payment to arrive at total sale price.  To ensure the seller gets all of their money, put in a 100% prepayment penalty clause in the loan.  

Do any more learned members (especially other CPAs) have an idea if this could work?  Are there laws against prepayment penalties for private loans?

Thanks!

@Cameron Price I think the thread has covered some of the complex issues that you're looking at (recapture, etc).  I would say as a CPA, I try to make sure that I explain to my clients why their tax situation "is what it is".  If your current CPA/preparer doesn't sit down and go over the concepts specific to your situation, it's time to find a new one.

Many people think we should move to a flat tax.  However, flat taxes aren't exactly fair.  As an example, say we have a 10% flat tax in the US.  Let's say we have two families, A&B, who make $50,000 per year and $500,000 per year.  I guarantee that $5,000 is worth a WHOLE lot more to A family than $50,000 is worth to B family because A uses most of its income to survive, while B uses a smaller portion of its income to survive.

@Cameron Tope Thanks Cameron, I just PM'ed you.

Hi y'all!

I'm Matt Heider and I'm a CPA in the Lubbock, TX area.  I'm new to real estate investing and plan on purchasing my first property within the next year.  In the meantime, I'd love to help out in any way I can.  I don't have a ton of real estate investing knowledge yet, but I've helped plenty of clients with tax and business planning relating to their real estate ventures, so I'd be happy to add value where I can.  I'm a former teacher and a tax geek, so explaining tax concepts where normal folks can understand and apply them is my specialty.

I know there's a group in Lubbock that meets around the third Tuesday of the month, is that still true?  I'd love to connect with y'all sometime.

Thanks!