All Forum Posts by: Tim Silvers

As a landlord, does anyone know if the EIDL loan proceeds can be used for repairs and improvements to our property(s)?

This article states that, " EIDL funds can also only be used as “working capital” related to economic injury after Jan. 31. They can’t be used as capital for physical improvements..."

https://www.cnbc.com/2020/05/2...

A section of the actual SBA loan agreement also states:

"USE OF LOAN PROCEEDS
· Borrower will use all the proceeds of this Loan solely as working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter and for loans of more than $25,000 to pay Uniform Commercial Code (UCC) lien filing fees and a third-party UCC handling charge of
$100 which will be deducted from the Loan amount stated above."

Since tenants ARE our business customers that rely on the property(s) condition and that it is imperative for landlords to keep their properties in rentable and updated conditions in order to get tenants and keep tenants in order to generate rent, this restriction would make zero sense.  

Can anyone please clarify?

Have any of you investors, agents, landlords, flippers or wholesalers or other non-W2 earners applied for PUA benefits? Was your application accepted, and if so, how has it been working for you thus far?

 Hmmm, would like Ashish to weigh in on this, as he didn't bring any of this up nor did any accountant I spoke to before. 

 Why would the $75K be taxable when it hasn't even been received yet? Borrowers on seller-financed notes have a high rate of default and may ever make it the finish line, for one. I would think the tax should be based only on payments that are actually collected.

 Thanks for the insight.

I am just using this example for educational purposes, not for an actual return. For sake of simplicity, am leaving out any cost of sale (i.e. closing costs, etc.).

So, as the loan pymt is $2,510.86, and based on a 10-year full amortization, the 1st pymt based on the amortization schedule is broken down as follows:

- interest =  $927.53 (100% taxable)

- principal = $1,583.33 of which 37.5% is taxable = $593.75

- total taxable amount: $1,521.28

Treatment of down pymt:

- $10,000.00 x 62.5% non-taxable

- $10,000.00 x 32.5% taxable = $3,250.00

Does this look correct?

Ok, so to further break down:

Cost basis: $125K

Purchase Price: $200K

Net profit: $75K (37.5% taxable income)

Down Payment: $10K

Loan amt: $190K (fully-amortized)

Term: 10 years

APR: 10.00%

Loan Pymt: $2,510.86

So then based on your numbers - 37.5% x $2,510.86 = $941.57 taxable income?  

How would the $10K down pymt be handled?

WHAT I NEED TO KNOW:

Since the example I gave above is considered an INSTALLMENT SALE, there is very specific treatment as to taxable income and expenses which I still am trying to understand. I sort of get the income part (the portion of the payment that is profit and not return of capital, and the interest portion. What I don't understand is the treatment in terms of expenses. Am I as the seller only able to deduct the amount of expense proportionate to the income? 

 I'm the seller. Need to know.

What are the tax implications for the seller of a seller financed property in which the seller purchased, remodeled and sold it on terms?

Hypothetical transaction with easy numbers:

1) Seller acquires property for $100K.

2) Sellers rehabs property for $25K.

3) Seller sells property to buyer for $200K via seller financing

4) Down payment $10,000.00. Loan is fully amortized. Term: 10 years, no balloon.

Specifically, how would the taxes be applied for the portion of the payment that is profit and interest and exactly how would the out of pocket expenses (acquisition and rehab) be deducted to offset the taxable income? How is the return of principal excluded? Based on the above figures, how would that break down for the first year?

What are the tax implications for the seller of a seller financed property in which the seller purchased, remodeled and sold it on terms?

Hypothetical transaction with easy numbers:

1) Seller acquires property for $100K.

2) Sellers rehabs property for $25K.

3) Seller sells property to buyer for $200K via seller financing

4) Down payment $10,000.00. Loan is fully amortized. Term: 10 years, no balloon.

Specifically, how would the taxes be applied and would only a portion or all of the acquisition and rehab expenses be able to be deducted? Based on the above figures, how would that break down for the first year?

r, selling it for $100k. Buyer pays $40k down, and the rest will be paid via sellers financing at 5% interest on a 10 year note, 20 year amortizations with a balloon payment at the end.

Is it correct to assume that:

1. The $40k down is subject to capital gain on the year of closing.

2. The 5% interest is considered a regular interest income. Buyer can deduct this part. What about the portion of the payment that goes to the principal ?

3. When the balloon payment is paid, this is considered as capital gain on the year of the payment.