[WSBARP] tax question

[Kary Krismer]

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
>
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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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