San Diego Housing Market News and Analysis
Untraditional "flip" - how to handle tax liability?
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Submitted by FeistyNumerate on December 11, 2018 - 5:44pm
This past year I helped a friend get out from under a house that was falling apart around them.
In doing so we entered an agreement in which we established a purchase price for the home but in which they continued to carry the note. In exchange I covered the carrying costs of the house and fronted/loaned them the money to move out and secure a lease. In addition I covered the repairs and remodel of the house in order for it to hit the market with better results than what could have been expected from a cash buyer. The house would not have been approved for traditional lending in the state it was.
The house sold and I was paid out from escrow the difference from our purchase price and the price the house sold for.
I did charge interest for the loan amount. Where I am stumped is how to do I classify the amount that exceeded loan/interest??
I am not attempting to welch on any tax liability, and I'm anticipating this amount will be taxed at my income tax rate.
Thank you in advance! I'm also interested in any accountant referrals for someone with RE experience.
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