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<p>Wouldn't there also be recapture of the depreciation during the
rental period?</p>
<p>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.<br>
</p>
<pre class="moz-signature" cols="72">Kary L. Krismer
206 723-2148</pre>
<div class="moz-cite-prefix">On 5/18/2020 2:54 PM, Craig Gourley
wrote:<br>
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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
<span id="ms-outlook-android-cursor"></span>a note.. Hope this
helps. Craig <br>
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<div id="divRplyFwdMsg" dir="ltr"><font style="font-size:11pt"
face="Calibri, sans-serif" color="#000000"><b>From:</b>
<a class="moz-txt-link-abbreviated" href="mailto:wsbarp-bounces@lists.wsbarppt.com">wsbarp-bounces@lists.wsbarppt.com</a>
<a class="moz-txt-link-rfc2396E" href="mailto:wsbarp-bounces@lists.wsbarppt.com"><wsbarp-bounces@lists.wsbarppt.com></a> on behalf of David
Daniel <a class="moz-txt-link-rfc2396E" href="mailto:ddaniel@demcolaw.com"><ddaniel@demcolaw.com></a><br>
<b>Sent:</b> Monday, May 18, 2020 2:33:27 PM<br>
<b>To:</b> WSBA Real Property Listserv
<a class="moz-txt-link-rfc2396E" href="mailto:wsbarp@lists.wsbarppt.com"><wsbarp@lists.wsbarppt.com></a><br>
<b>Subject:</b> Re: [WSBARP] tax question</font>
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Thank you very much sir. Very concisely put. :)</div>
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<span
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Suite 200</span></p>
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<span
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<div dir="ltr" class="x_gmail_attr">On Mon, May 18, 2020 at
2:28 PM Marvin Benson <<a
href="mailto:marvinbensonlaw@gmail.com"
moz-do-not-send="true">marvinbensonlaw@gmail.com</a>>
wrote:<br>
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<div dir="ltr">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.
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<div>Marvin Benson</div>
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<div dir="ltr" class="x_gmail_attr">On Mon, May 18, 2020
at 12:34 PM David Daniel <<a
href="mailto:ddaniel@demcolaw.com" target="_blank"
moz-do-not-send="true">ddaniel@demcolaw.com</a>>
wrote:<br>
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Listmates,</div>
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I certainly am not a tax advisor so I may have my
terminology wrong here, but here goes:</div>
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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? </div>
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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). </div>
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Hope that makes sense. Any insights? Thanks in
advance.</div>
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<b><span
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style="font-size:11pt; font-family:Garamond,serif; color:rgb(7,55,99)">,
Attorney</span><br>
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<span
style="font-size:11pt;
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</span><b><span
style="font-size:13.5pt; font-family:Garamond,serif; color:rgb(7,55,99)"> DEMCO
LAW FIRM, P.S.</span></b><span
style="font-size:11pt; font-family:Garamond,serif; color:rgb(7,55,99)"><br>
<u><sup>____________________________________</sup><br>
</u><b>Office
|</b> (206)
203-6000<br>
<b>Email |</b> </span><u><span
style="font-size:11pt; font-family:Garamond,serif; color:rgb(17,85,204)"><a
href="mailto:ddaniel@demcolaw.com" target="_blank"
moz-do-not-send="true">ddaniel@demcolaw.com</a></span></u><span
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<span
style="font-size:11pt;
font-family:Garamond,serif; color:rgb(7,55,99)">5224 Wilson Ave. S.,
Suite 200</span></p>
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class="x_MsoNormal"
style="background-image:initial; background-position:initial;
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<span
style="font-size:11pt;
font-family:Garamond,serif; color:rgb(7,55,99)">Seattle, WA 98118</span><span
style="font-size:12pt; font-family:"Times New Roman",serif"><span></span></span></p>
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