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Updated over 5 years ago on .
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Question for CPA; Capital Gains, lump sum or payments?
My Mom and her husband are selling a property they lived in for the last decade or so. This money is their retirement. Sales price of about $259K The buyers want to pay 100K down then make payments for 5 years with a balloon then. I explained several ways to do it and told her to talk to a CPA and Lawyer. but thought I would see what you guys would say? My concern was that the interest if charged might mess up the no taxes on capital gains. I suggested raising the price and not charging interest. What say you?
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- Tax Strategist| National Tax Educator| Accepting New Clients
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The interest would need to be imputed as part of the sale. It's required by the IRS. Their CPA would calculate it.
And I apologize- I overlapped two thoughts because I didn't see that they had occupied it in your original post.
If they've both occupied and owned it for 2 of the last 5 years then it's tax free up to $500k either way- If they do it on installment sale there will be some interest income they receive.
If they didn't meet the 2/5 year test, or if they also rented it, ect - then it could still potentially be tax free if spread out is was what I was getting at.
