Taxes implications for buyers and seller on finance deals!?

[Jaime Navarro]

Taxes implications for buyers and seller on Seller finance deals!?

I’m working on a seller finance deal and have some questions on Taxes.

Seller: Family member

Seller’s Purchase price in 2009: $180,000

Property owned free and clear

6 unit building

Interest: 4%

Our plan:

Purchase price (in 2018): $550,000

15 years mortgage

We understand the seller will have to pay CAP gain taxes.

1, But will this taxes be deferred since he will be receiving his $$$$ monthly for 15 years?

2. Or would the seller have to pay taxes up front the sales occurs?

3. Will my monthly payments including Principal and Interest be taxable at the end of the year? 

Thanks in advance for you feedback.

Jaime