All Forum Posts by: Stephen Chittenden

What type of business entity are you talking about?

We use Guardian for a three-unit property in Maryland. They've been great.

It's hard to imagine why you'd be able to find a property and purchase it for 25% below its FMV.

Section 1274 of the Code would require you to recharacterize a portion of the payment as interest. This would affect the calculation of basis, interest income, etc.

I don't see any reason why you couldn't market them as an eight-unit complex for renters, etc., if you are looking to give the impression of a complex.

We too do none of the work. We have day jobs that keep us busy. We rely on professionals to do the work.

Wayne, if you're thinking about 7872 that would only apply if the loan was a tax avoidance loan or there was some relationship between the parties. If the price was set at FMV, I think the IRS might have a hard time arguing that it was a tax avoidance loan.

Ryan, There wouldn't be capital gains on the sale of principal residence in my example.

I do not believe it would be illegal, but the IRS might object to the characterization of the loan as principal-only payments. They might insist that the sales price was less than the price agreed and that interest was built into the purchase price. If the sale price was well-documented as being FMV, it would seem like a difficult case for them. I could see why the IRS would object in some cases though. For example, imagine a owner-occupant selling a home with significant appreciation and owner financing. If the house was purchased for $500k and was now worth $900k. A married joint owner-occupant might want to characterize the sale as a sale for $1m financed at 0% interest. All of the gain would be excludible. In contrast, if the sale was $900k with X% interest such that the payments were the same, the portion of each payment that represents interest would be includible in income. A CPA might have more thoughts.

Taxes