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jackstacey
New Member

What are the tax implications of holding a mortgage on the sale of a condo that I own? I have a capital gain.

 
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Mike9241
Level 15

What are the tax implications of holding a mortgage on the sale of a condo that I own? I have a capital gain.

to make answering easier

1) is the condo your principal residence or was it used as your principal residence in any 2 of the 5 years before the sale?

2) was it ever rental property?

3) did you convert it from rental to principal residence? 

I assume you're asking about seller-financing 

 

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3 Replies
Mike9241
Level 15

What are the tax implications of holding a mortgage on the sale of a condo that I own? I have a capital gain.

to make answering easier

1) is the condo your principal residence or was it used as your principal residence in any 2 of the 5 years before the sale?

2) was it ever rental property?

3) did you convert it from rental to principal residence? 

I assume you're asking about seller-financing 

 

jackstacey
New Member

What are the tax implications of holding a mortgage on the sale of a condo that I own? I have a capital gain.

1.)  It was our principal residence for residence in 2 of last 5 years   2013 to 2019.   rented out 2020 and 2021

2. )  We rented it out for 2 years 

3.)  We did not convert from rental to principal residence.

 

Yes asking about seller financing.  Depreciation taken in 2020 ~ 3k & 2021 ~3k.    Cost Basis of ~$150K  selling for ~$400K (married filing jointly)  Offer of 300K down + 100K  in seller financing.

Mike9241
Level 15

What are the tax implications of holding a mortgage on the sale of a condo that I own? I have a capital gain.

you have an installment sale.  even though you would qualify for the home sale exclusion, depreciation taken while it was a rental must be recaptured before the home sale exclusion can be applied.  normally form 6252 would be used to report an installment sale. but you'll have no reportable gain, except for depreciation, because of the home sale exclusion. so no purpose is served in reporting the sale on an installment basis. 

 

 

you do need to charge interest on the $100K. if you don't the IRS can impute interest which means that as you collect the$100K the IRS will treat a portion as interest and the rest as tax-free principal.

 

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