All Forum Posts by: Abdenour Achab

I, Sam Zell (not my real name), am the sole member of ABCDE, LLC, a New Mexico LLC with address 123 Spruce Street, Sante Fe, NM. I want ABCDE to acquire title to a real property in Arizona. On the deed, who should the grantee be ?
1) ABCDE, LLC
2) ABCDE, LLC, 123 Spruce Street, Santa Fe, New Mexico 87501
3) ABCDE, LLC, 123 Spruce Street, Santa Fe, Santa Fe County, New Mexico 87501
4) ABCDE, LLC, Sam Zell, Member and Manager, 123 Spruce Street, Santa Fe, Santa Fe County, New Mexico 87501
5) Something else (please specify)

If possible at all, I would really like my name not to appear on the deed (i.e option 4 is bad for me, and I would only use it if I have no other option without my name on the deed).

If I have more than one option among the first three, please let me know also.

Hello,

I am doing my taxes right now and, under the "PERSONAL" category, I see "Interest and Dividends", under which there is "Interest from Seller Financed Loans". I reported the interest I earned from my notes there.

But, since I bought my notes at a discount, I also earned income from the notes due to the discount element. Where do I report that ?

I see a section at the bottom named "Miscellaneous Income, 1099-A, 1099-C", inside which there is "Other reportable income". When I enter my discount element there, TurboTax doesn't offset that income against past investment losses that I carried forward from past years.

It seems to me that a discount element from a note held for long term investments should be offset by investment losses carried forward from past years. And, therefore, that the "Other reportable income" should not be the section where I enter income due to the discount element.

Which brings me to the subject of this thread: How do you report income due to discount element in TurboTax ?

Abdenour

Hello,

I am doing my taxes right now and, under the "PERSONAL" category, I see "Interest and Dividends", under which there is "Interest from Seller Financed Loans". I reported the interest I earned from my notes there.

But, since I bought my notes at a discount, I also earned income from the notes due to the discount element. Where do I report that ?

I see a section at the bottom named "Miscellaneous Income, 1099-A, 1099-C",  inside which there is "Other reportable income". When I enter my discount element there, TurboTax doesn't offset that income against past investment losses that I carried forward from past years.

It seems to me that a discount element from a note held for long term investments should be offset by investment losses carried forward from past years. And, therefore, that the "Other reportable income" should not be the section where I enter income due to the discount element.

Which brings me to the subject of this thread: How do you report income due to discount element in TurboTax ?

Abdenour

Thank you very much @Mike Hartzog for that explanation. So, the Discount Earn account is an income, but it's neither interest, nor short term capital gains, nor short long term capital gain ? By the way, I buy note in my own name. Any idea where in my tax returns I should report it ? So far, I have just been reporting it as interest (along with the real interest income), both bundled in interest earned line of my 1040.

Let's take an example. Let's say a trust deed backed note was issued in August 2005 in the amount of $44,500, with interest rate of 6%, and payments of $266.80 amortized over 30 years. Let's say you bought it in September 2006 for $16,500, when the balance was $43,000. In October 2006, you received a $266.80 payment, $215 of which is interest and $51.80 is principal pay down. 

How much interest income would you report on your taxes for that October 2006 payment ?

Do you report some discount element as short term capital gain, or just as interest ?

Any references to an IRS publications will be appreciated, but I prefer note investors telling me, using numbers, what they would report, and where, in the case of the above example.

Also, please don't respond if you have never bought a note at a discount. I don't want this thread turning into a generic discussion about what is and what is not taxable income, or how similar situations are handled when people buy low or no interest bonds at a discount, or how people who sell their house and take back a mortgage do it.

Thanks in advance.

 Grrrrrrrrrrrrrr

I want the asset (house, land, or other RE less likely to have environmental contamination). 

Thanks Probate Guy for your reply. But, what is a better strategy for one investor's circumstances is not necessarily a better strategy for another investor's circumstances. So, I would appreciate it if people keep this thread focused on the question asked, which is about "to acquire a property by buying and foreclosing on a tax lien, in Arizona, worth at least $30,000 as is.", and use other threads to discuss other strategies.

By the way, after I originally asked the question, I did some further reading of this forum and found a woman who said that she gave a lead on a tax lien to a guy in Arizona (Pima county if I remember correctly), and that guy managed to acquire the property by buying and foreclosing on the lien. And that that property was worth $250,000. These are the kind of success stories I am looking for. Ideally first hand account.

 Thanks Josh for that information. That revives my hope that pursuing property acquisition through tax liens is a viable strategy. Do you care sharing one of your success stories with us ? Including, if you know, what was the situation of the prior owners, and why neither them nor their relatives redeemed the property.

On my side, my most profitable deal was a $10,000 house in Oklahoma county (from back in the days when Oklahoma counties were selling tax lien certificates). My total acquisition cost was under $2,000. The kitchen had burned down, and the owners simply abandoned it. I never heard from them. I sold the house to guy who just started investing in real estate. He has since rehabbed it.

I have invested in tax lien certificates for about a decade, from 2002 to 2012, with very little success. While I did manage to acquire a few properties, none was worth more than $15,000.

I am considering getting back to tax lien investing next year, with a focus on Arizona (not too far from California where I live). I am interested in acquiring properties, not the interest rate. I was wondering if anybody here managed to acquire a property by buying and foreclosing on a tax lien, in Arizona, worth at least $30,000 as is.