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Chad Oberg
Chad Oberg, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 174
Experience:  10 + years of accounting and tax experience, financial statements and business planning
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A tax on profit question I have some one interest to buy

Resolved Question:

A tax on profit question:

I have some one interest to buy my investment property at a set price. But the buyer want to settle at the end of 2 years. If I enter the contract now with settlmet in 2 years, will I have to pay tax on the capital gains this finacial year or I will pay tax at the actual seetlment finacial year?
Submitted: 6 years ago.
Category: Tax
Expert:  Chad Oberg replied 6 years ago.

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No you do not have to recognize the entire sale in the first year. You could set-up what is called an installment sale which can be utilized several ways. However, a common way is to agree on a sales price of which a portion is received now and then an installment is received (plus interest on the note) in the next couple years. This can be spread out even further than 2 years if desired. Please see the below attachment which contains IRS Publication 537 which provides further guidance to these types of transactions.

 

http://www.irs.gov/pub/irs-pdf/p537.pdf

 

You will need to make sure you have written contract with all the specific agreement included. The calculations can get complex and you may want to consult with your tax adviser who understands these transactions. This service is to help you go in the right direction. However, it cannot cover all the intricacies of complex transactions such as installment sales and guarantee success under an inquiry from a taxing agency.

 

If you have any further questions, please do not hesitate to contact me.

 

Regards,

 

CEO, CPA

 

If you have any questions, please do not hesitate to contact me.

 

Regards,

 

CEO, CPA

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