Real Estate Investment Law- Wisconsin

6 Replies

Anthony
You're question is rather open ended. Based upon your first and last post, maybe you should simply contact a lawyer.

All of the laws in WI can be found in the code Emilio refers to. But, to cover everything from contract law to imputed interest, is just too open ended. Do you have any specific questions?

My biggest question I have is it legal in WI to structure a deal with a set amount of interest verse a percentage. for instance.

3400 a month towards principal
1200 goes toward interest
ballon payment after 10 years
(the sellers retiring)

So, you're really asking a tax question. Remember, I'm not a CPA.

I found an explaination at

http://www.realtown.com/words/imputed-interest

It basically says that lacking an interest rate on an installement sale, the seller cannot determine by themselves, the amounts being paid towards principal and interest. In your example, the seller would be claiming too much towards principal, and not enough in interest. The seller would want to do this as the principal is taxed as cap gains, while the interest is at a higher tax rate, ergo, the IRS would impute the amount of tax paid at a rate they prescribe, and with amortization, a much greater amount of that $3,600 monthly payment (almost all), would be taxed as interest income.

So, in effect, your answer is yes, you can structure the deal any way you like, as long as you impute interest per IRS rules on your tax return.

Uncle Sam's gonna get his share, no matter how creative someone wants to be.

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