So none of the assets will have a value in the Land Sales Price and Land Sales Expenses right?
That is incorrect. What I"m saying is that there's no depreciation on the land to be concerned with, since land is not a depreciable asset. But this I do know for a fact that I've proven to myself on more than one occasion.
- If you sell at a gain, then you *must* show a gain on every single asset listed. The amount of gain doesn't matter. So that gain can be $1 on some assets while $100,000 on another asset.
- If you sell at a loss, then you *must* show a loss on all listed assets - even if that loss is only $1 on some assets, and $10,000 on other asset.
A gain is a gain. Period. A loss is a loss. Period. For tax purposes the amount of gain or loss on an individual asset just doesn't matter.
If you show a gain on some assets, yet a loss on others, then the TurboTax program will sometimes (not always) have a problem with doing things correctly on the 4797 and/or SCH D. It doesn't always work out that way. But when it doesn't do things correctly you "DO* *NOT* get any kind of an error message or anything. You have no clue until sometime after you file, (could be years) that there was a screw up until you get the notice from the IRS.
Now how things work for an installment sale, I've not got a clue. I've never done an installment sale or even made an attempt to learn about them on the tax front. That's because from my first hand knowledge of others in the past who have done an installment sale, the sale has fallen through 100% of the time and the seller ends up either losing it all if they didn't do everything right on the legal front, or the seller ends up foreclosing on the property and repossessing it.
Based on my extremely small sample from my own personal knowledge of people whom I know who sold real estate on installment, here are the statistics.
- Chances of foreclosing on the property in the first two years are above 90%.
- Chances of foreclosing on the property in the first five years are 100%.
I personally have never known or met a person who saw an installment sale to full payoff.
In my opinion (and we all know what opinions are like!) If a bank or other licensed lending institution won't loan the buyer the money, then why would I? It makes no sense regardless of the seller's situation. But that's me and I don't condemn others for not thinking as I do. However, I do at least like to forewarn sellers of the risk and high probability that the buyer is going to renig on the sales contract/loan agreement at some point before the 5 year mark. If the seller is depending on that payment from the buyer to make their own mortgage payment, then they're really up a creek without a paddle.
