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jrroecker
New Member

Sale of home on land lease

My fiance's parents are selling a rental property that is currently on a land lease. The bill of sale is actually in my fiance's name, so I am concerned that we are going to be hit with capital gains tax on the sale of the home. 

 

Does the sale of this home fall under the Taxpayer Relief Act of 1997, or is it considered an asset such as other physical property or investments for which you must pay capital gains. The base value and current have a difference of about $60k.

 

I've tried to research this, but cannot find a good answer on capital gains tax for a home sold with leased land.

 

Your thoughts are greatly appreciated!

 

Jason

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2 Replies
Anonymous
Not applicable

Sale of home on land lease

give us a little more info 

in whose name is the title to the house in?

in whose name is the title to the land in?

what is the relationship between the buyer and seller?

do you have the permission of the owner of the land to sell the house (should be spelled out in land lease?  

 

Hawaii and a few other states have another form of ownership known as leasehold.

LEASEHOLD: A leasehold interest is created when a fee simple land-owner (Lessor) enters into an agreement or contract called a ground lease with a person or entity (Lessee). A Lessee rents the land from the Lessor for the rights of use and enjoyment of the land much as one buys fee simple rights; however, the leasehold interest differs from the fee simple interest in several important respects. First, the buyer of leasehold real estate does not own the land; they only have a right to use the land for a pre-determined amount of time. Second, if leasehold real estate is transferred to a new owner, use of the land is limited to the remaining years covered by the original lease. At the end of the pre-determined period, the land may legally revert back to the Lessor, and is called reversion. At the end of the lease term many lessors and lessees have agreed on either a new lease or the Lessor may agree to sell the land to the Lessee. In the case of a condominium depending on the provisions of any surrender clause in the lease, the buildings and other improvements on the land may also revert to the lessor. Finally, the use, maintenance, and alteration of the leased premises are subject to any restrictions contained in the lease.

 

to give an example.   a shopping mall may own all the land.   a potential tenant may want to put up a store.  which they pay for and pay the mall to lease the land.   when the lease  is up, it can be renewed.  The other possibility is that the mall says remove the building which can be enforced.  

Spence
New Member

Sale of home on land lease

I appreciate the help.  We lived in Fiji on an outer island for 14 years.  Leased Crown Freehold land for that entire time.  The land was undeveloped.  My wife and I built our B&B type of resort on this island.  Our total construction costs in US$708k.  Over the years since 2004 my wife experienced several medical issues which finally forced us to sell in 2018.  The resort was sold via Mortgage agreement for 20 years for $900k.  Installments for the mortgage started in 2019, but we received a down payment of US$292k +$44k to cover main island expenses to complete the 8 month review by the government, lawyers and finally Registration of the transaction, December 2018.  There is a loss at this point on the sale.  Installments as I have stated did not start until January 2019.  Which I plan to add to 2019's tax report.   

Fiji Revenu & Customs Service (FRCS) reviewed all of our files from 2004 to the end of 2018 and issued a their findings stating "We advise that there will be no  Capital gains tax (CGT) applicable on this transaction as there is no disposal of the property".   We still own the property due to the Mortgage agreement which we hold. 

The mortgage is at 4% and the Fijian government receives 10% of the interest paid to us each month.

At this point we have lost money as FRCS discovered.  We had no choice in this matter of course.

Again  your help is appreciated. 

Spence  

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