[WSBARP] tax question
Kary Krismer
Krismer at comcast.net
Mon May 18 15:26:35 PDT 2020
Wouldn't there also be recapture of the depreciation during the rental
period?
Most of my understanding of tax is about 40 years old, but I do seem to
recall the option to elect to recognize the gain immediately on contract
sales. So thank you for the cite to 453.
Kary L. Krismer
206 723-2148
On 5/18/2020 2:54 PM, Craig Gourley wrote:
> As far as the reason for this and the proceedure, I am presuming they
> have been using it as a rental for the last few years. Code section
> 121 allows the $500k of tax free gain to married couples filing
> jointly if the home has been their principal residence for 2 of the
> last 5 years. So if they are close, they need to sell before they
> exceed that 3 years of non primary residence use. They appear to be
> selling on a section 453 installment sale. My guess is that they plan
> to elect out of 453, accelerate the gain and recognize it in the year
> of sale. This accelerated gain is then considered exempt under
> Section121. The net result is future payments on that note are tax
> free (except the interest portion) up to the $500k amount. I would
> suggest using a note and DOT as I don't know if you can accelerate
> gain on a real estate contract but know you can on a note.. Hope this
> helps. Craig
>
> Sent from my Verizon, Samsung Galaxy smartphone
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> ------------------------------------------------------------------------
> *From:* wsbarp-bounces at lists.wsbarppt.com
> <wsbarp-bounces at lists.wsbarppt.com> on behalf of David Daniel
> <ddaniel at demcolaw.com>
> *Sent:* Monday, May 18, 2020 2:33:27 PM
> *To:* WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> *Subject:* Re: [WSBARP] tax question
> Thank you very much sir. Very concisely put. :)
>
> *
> *
>
> *David C. Daniel*, Attorney
>
> _^____________________________________ _
> * DEMCO LAW FIRM, P.S.*
> _^____________________________________
> _*Office |* (206) 203-6000
> *Email |* _ddaniel at demcolaw.com <mailto:ddaniel at demcolaw.com>_
>
> 5224 Wilson Ave. S., Suite 200
>
> Seattle, WA 98118
>
>
>
> On Mon, May 18, 2020 at 2:28 PM Marvin Benson
> <marvinbensonlaw at gmail.com <mailto:marvinbensonlaw at gmail.com>> wrote:
>
> For the purpose of the exclusion of gain from the sale of
> taxpayers principal residence, there is nothing wrong with
> installment sales. If the taxpayer later repossesses the
> residence, there are rules for recalculating the gain. If the
> transaction were fraudulent there could be other rules involved.
>
> Marvin Benson
>
> On Mon, May 18, 2020 at 12:34 PM David Daniel
> <ddaniel at demcolaw.com <mailto:ddaniel at demcolaw.com>> wrote:
>
> Listmates,
>
> I certainly am not a tax advisor so I may have my terminology
> wrong here, but here goes:
>
> Client advises that he and his spouse need to sell their
> property within a month from now to capture the $500k
> exclusion from capital gains on sale of personal residence.
> Client wants to proceed with a seller-financing transaction to
> a buyer who will pay little-to-nothing down. Can Client
> capture the full benefit of the $500k exclusion on such a
> transaction even if no (or very little) cash gain is
> recognized at the closing? Does it make a difference if it is
> Note/DOT vs. REK?
>
> Seems to me the exclusion would only apply to gain actually
> recognized prior to the deadline (i.e. at closing), because to
> allow otherwise would seem to create a loophole for Client to
> capture the benefit by simply transferring the property to an
> insider (who could then subsequently sell the property to a
> third party, without concern over the deadline, and then agree
> (on the side) to a profit sharing arrangement with the
> original owner/Client).
>
> Hope that makes sense. Any insights? Thanks in advance.
>
> *
> *
>
> *David C. Daniel*, Attorney
>
> _^____________________________________ _
> * DEMCO LAW FIRM, P.S.*
> _^____________________________________
> _*Office |* (206) 203-6000
> *Email |* _ddaniel at demcolaw.com <mailto:ddaniel at demcolaw.com>_
>
> 5224 Wilson Ave. S., Suite 200
>
> Seattle, WA 98118
>
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