How do we reinvest money from a contract for deed sale

Well, this is a tax group, not an investment group. But from a tax standpoint there are some investments that have tax qualities that some people like better than others. For example investments in real estate, when purchased with a fairly small down payment, can generate depreciation deductions that are relatively large compared to the investment. On the other hand if you sell the property eventually then the depreciation will have to be recaptured, meaning that you'll end up paying tax on it at that time.

One investment I'm aware of that avoids taxes is municipal bonds - normally interest on them is tax free. My understanding is that they pay a relatively high interest at the moment, probably because so many governmental units are so short of money right now, and some well-known cities have filed bankruptcy lately. So try them if you dare - if you don't lose your investment you could end up doing pretty well.

"bonnie" wrote

Could you possibly be thinking about a "Like-Kind Exchange"? That, when you sell an asset and buy a "Like-Kind" asset where the gain on the asset sold is deferred into the new asset purchased. If you're thinking along those kind of lines, to defer the gains on the sale of the business by "reinvesting" the proceeds, there would be a lot more information needed on what you are selling and how that sale is transpiring. Maybe much more so than can be covered in a newsgroup setting, so seek local legal and tax advice where a sit-down is going to be needed.

That's an excellent observation, Paul - I'd missed that possibility.

If that is her object, OP should realize that not all exchanges qualify under 1031 - including the exchange of securities (e.g. corporate stock) and partnership interests. And then the exchange must be for something "like kind." So there is a reasonable chance that her transaction won't qualify anyway.

So I agree with you - OP needs to consult her own tax advisors, who can look into all the relevant details and determine what she can do and what she can't.

I saw a proposal to federally tax muni bonds. And note that muni funds may still have federal tax if they have private activity bond interest (public-private partnerships), but the interest is only taxable on form

The OP needs to follow this advice (see a local tax pro conversant in like-kind exchanges) BEFORE CLOSING on the sale.