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When report sale??

Background:

Taxpayer A owns half of a house (tenants in common) with Brother B. Brother B has lived in the house as his primary residence for many years; TP A has not live in the house for many years. B would like to purchase A's interest in the house for a promissory note at market interest, such note principal and all accrued interest due when and if B sells house. That may be in the near or distant future. The note would be recorded as a lien against the house.

Question:

Would taxpayer A report the sale of the house 1) when the note is recorded and the transfer to B occurs; or 2) when the principal and interest of the note are paid after B sells the house?

The TP is hoping (1) is the answer so that he will have the money to pay the taxes from the proceeds of the sale.

Thanks for any comments.

Reply to
Vic Dura
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When title passes from A to B, A is considered to have sold the house to B.

Reply to
Alan

Although the sale is reported when the transfer occurs, the seller has the option of reporting the sale as an installment sale. Taxes would only be due as funds are transferred from buyer to seller.

Ira Smilovitz

Reply to
Ira Smilovitz

By treating it as an installment sale, the income is taxed when received.

However, I'm not sure about the interest; that might be taxable to A when accrued.

Seth

Reply to
Seth

On Sun, 9 Mar 2008 22:02:34 EDT, "Ira Smilovitz" wrote Re Re: When report sale??:

Thanks to all for the comments, particularly Ira and Seth. It looks like an installment sale is the way to go.

One further question:

I assume the closing attorney would send a 1099 to the installment sales contract seller and the seller reports the installment sale on Form 6252. Is reporting the sale on the Form 6252 sufficient to account for the 1099 received, or does it need to also be reported someplace else?

Thanks for any comments.

Vic

Reply to
Vic Dura

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