Selling a Owner/Seller Financed Note
Hi All, I'm trying to understand what the tax implications are for selling an owner/seller financed note.
Here is an example of my situation: I acquired a 1 acre parcel for $15K. I spent another $5K in clean up, mowing, etc. My total basis is $20k. I sold the cleaned 1 acre lot for $40K via owner/seller financed. The terms were $5K down payment, 10% interest, amortized of 20 years, PI payment of $337 per month with balloon payment at the end of year 5. I have had this note for 15 months now. A group offer to buy my note at 95% of the remaining principal balance. (note I understand interest is tax at short term rates)
My question is how would this sale be tax? I'm assuming its long term capital tax rate on the gain. Since I create the note initially is there other tax implications I need to be aware of?
Thank you for your help!