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I am a real estate broker and I have a client that is

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I am a real...

I am a real estate broker and I have a client that is selling their commercial property. The buyer wants to explore a couple of financing options that include seller financing of $1,800,000 at 5% interest only payments for 5 years with a balloon payment at the end of term OR an equity partnership of $500,000 at 10% for 2 years. Is there a tax advantage to either option that gives some tax relief to the sellers. They are in their 90's and short term gains are more important to them than long term investments.

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

No, just that

Submitted: 6 months ago.Category: Tax
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1/2/2018
Tax Professional: Lev, Tax Advisor replied 6 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,139
Experience: Taxes, Immigration, Labor Relations
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There is no specific advantages or disadvantages between these options.
An installment sale is a sale of property where you'll receive at least one payment after the tax year in which the sale occurs. You're required to report gain on an installment sale under the installment method unless you "elect out" on or before the due date for filing your tax return (including extensions) for the year of the sale.

Your total gain on an installment sale is generally the amount by which the selling price of the property you sold exceeds your adjusted basis in that property.

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Tax Professional: Lev, Tax Advisor replied 6 months ago

Whether you choose to report the TOTAL gain in the year of sale OR choose the installment method to spread the gain over several years - depends on your circumstances.

Under the installment method, you include in income each year only part of the gain you receive, or are considered to have received.

You generally report interest on an installment sale as ordinary income in the same manner as any other interest income.

Let me know if you need any help.

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