Owner financing and taxes
In a situation where somebody owns property free and clear and sells it to a friend and agree to non interest owner financing , what they need to report anything to IRS besides that one sold the property and the other party bought the property. Thank you
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Jon Holdman
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Jon Holdman#3 Real Estate Deal Analysis & Advice Contributor
#3 Real Estate Deal Analysis & Advice Contributor
- Rental Property Investor
- Mercer Island, WA
The seller will have gains on the property. Those are subject to capital gains tax. If its an installment sale, some gains are reported each year.
The IRS won't believe the 0% financing and will apply "imputed interest" and you will be subject to regular income tax at your ordinary tax rate on that.
IMHO, this is not something to do casually. See a lawyer about the paperwork to use. See an accountant about the taxes.