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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7194
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I am selling my home acquired from my mothers estate (she passed

Resolved Question:

I am selling my home acquired from my mothers estate (she passed in 2009), the person purchasing is waiting to sell their home, but want to give me a $100,000 note and will then give 1/2 the proceeds of any amount over $100,000 when their house sells.

2 questions: What interest rate do I need to charge on the $100,000 loan and what are the income tax implications for the $100,000 and the additional monies received when they finally sell their home?
Submitted: 5 years ago.
Category: Tax
Expert:  Stephen G. replied 5 years ago.
Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Did you make this home inherited from your mother your principal residence?

Are you married?

What are the likely proceeds from the sale of your buyer's home? Is there a mortgage on the home and if so is he talking about 50% of the selling price or 50% of the net proceeds to him? If the latter, what other obligations does he have that must come out of the proceeds?

Why would you want to tie up the sale of your home for an unknown period of time in exchange for the interest on $100,000.?

The interest rate will depend upon when you make the deal and the short-term rate published by the IRS, possibly around 3%; I can check on this for you after these questions are answered.

What was the fair market value of your mother's home at her date of death?
Customer: replied 5 years ago.
No this was not my principal residence, not married. My friends feel they can sell their home for $140,000. I would recieve another $20,000 in addition to the note. They will pay off the $100,000 loan with their proceeds from the sale. How can I find out the fair market value from 2009?
Expert:  Stephen G. replied 5 years ago.

If this was your mother's home there must have been a probate filing for her estate. The probate inventory should have listed the home at it's fair market value. As an alternative to that, you can have an opinion of value or an appraisal of the property, even now as of your mother's date of death.

The point is that given the real estate market, it is likely that the home was worth at least as much as it is now & possibly more. That being the case, there would be no capital gain to worry about when you sell the home.

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