I bought a house in October 2023 and plan to sell it in April or May 2024.
I'm considering doing an installment sale, reported on IRS Form 6252. The buyer would pay $100,000 down and about $4,000 in interest in each month on the remaining balance. Then in January 2025, they'd pay the rest, about $800,000.
The $100,000 I receive at the time when the title is passed would clearly be taxed as a short-term capital gain. Does that short-term capital-gain rate get locked in for all profits of the sale, even though I won't be receiving payment of the remainder until 2025?
i.e. if I structured the sale this way, do I still pay short-term capital gains on the $800,000 I would receive in January 2025, which is more than a year after I bought the house.
Thanks!
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yes . the taxability as short-term or long-term gain is based on the purchase and sales dates of the property not when you receive the proceeds.
The sale itself is short term and all cap gains will be considered short term even if you have an installment sale spanning decades.
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