Capital Gain

[Sarah Jones]

Im trying to do a subject to deal in california. The owner has a rental property. He is 2 months behind on his payment, he has been renting it out for more than 4 years. He owes $300k on it and the area comps for $300... he is afraid of capital gains. He is a CPA and he says if he sells the house he will have capital gain of $30k .. that would make it too expensive for us. Is there any way to avoid this 30k capital gain?

[Jon Holdman]

You don't pay the tax, the seller does. Now you could agree to pay him more than he needs for the house in order to give him cash to pay the taxes on the deal. But you're already taking over a $300K note on a house that's only worth $300K. So, this is a bad deal from the start. Now he wants you to pay his taxes? He's out of his mind.

You're putting in $6000 from the start. That makes a bad deal even worse. You're paying $306K for a house worth $300K. You say there's a tenant in there paying the mortgage. That makes me think the rent is more than the PITI payment, but not much more. So, it's cash flow negative. You're paying more than the house is worth for a house that's going to such money out of your pocket.

Actually, I suspect he may think you're a new and gullible investor and he's trying to pull the wool over your eyes. If you owe a tax bill to the IRS, they come after you. So, the IRS would come after him, not you.

I have zero sympathy for this guy. He already took the money!. Now he's pleading poverty that he can't afford the taxes? He's hoping to just grab the cash and escape.

Walk away.