Posted by JRSutton on March 21, 2013 at 04:51:59 from (75.130.109.233):
In Reply to: Re: Real Estate taxes posted by Frank 41 on March 20, 2013 at 19:08:04:
Without a doubt, best to talk to an attorney who deals in real estate transfers.
My unexpert opinion: It depends on how honest you are.
If the buyer paid your taxes for you first, then bought your land for the difference later - you'd still "legally" have to pay taxes on that pay-off amount, at least as a "gift". But there's really no reporting to the IRS so, it's all about what you tell them...
So yes, your capital gain would be reduced by the tax amount.
BUT the buyer would be foolish to do this for many reasons. First and foremost, he'd be foolish to trust somebody to follow up with a reduced sale after paying their taxes for them. And I don't think too many attorney's would eager to write up a legally binding contract for such a tax-scamming deal.
Next, the buyer would be foolish to do this because he'd be ensuring he pays inflated capital gains if he ever sells the land.
Just to use round numbers, say the buyer pays off 40,000 in taxes - then pays you 60,000 for a 100,000 property.
Hard times hit the buyer and he has to sell the property for a loss - say 90,000
He'd STILL have to pay taxes on 30,000 in capital gains.
Even if he sold it for a profit, he'd have to pay taxes on that additional 40,000 of capital gain.
I just don't see any upside to the buyer.
You could discount the price... but that kinda defeats the whole purpose of trying to get tricky in the first place.
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