[WSBARP] tax question

[Gabriel Dietz]

Yes, track the depreciation recapture and apportionment of non-qualified
use versus qualified use since 2008.

Gabe

On Mon, May 18, 2020 at 3:29 PM Kary Krismer <Krismer at comcast.net> wrote:

> 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> <wsbarp-bounces at lists.wsbarppt.com>
> on behalf of David Daniel <ddaniel at demcolaw.com> <ddaniel at demcolaw.com>
> *Sent:* Monday, May 18, 2020 2:33:27 PM
> *To:* WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> <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 <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>
> 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>
> 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 <ddaniel at demcolaw.com>*
>
> 5224 Wilson Ave. S., Suite 200
>
> Seattle, WA 98118
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