Discussion:Repossessed personal residence
From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> Repossessed personal residence
Discussion Forum Index --> Tax Questions --> Repossessed personal residence
Christine888 (talk|edits) said: | 10 October 2008 |
| I have a client that sold his personal residence in 2003 on the installment basis. He met all of the qualifications to exclude the gain on the sale of his personal residence. However, he repossessed the property in 2007 and re-sold it in 2007. Does he have to report this as capital gain, or does he retain the character of "personal residence" and therefore it is not taxable? | |
| 10 October 2008 | |
| There is a provision to treat this as a sale of principal residence and I know that there is a thread on TA from last year addressing this very issue. Have you used the search feature? I don't remember the qualifications off the top of my head. But I do know that the thread exists, as I remember most of what I read (the issues, not necessarily the content). I believe you will find that Riley2 answered it. | |
| 10 October 2008 | |
| Discussion:Form 6252--Installment sale question wow, this was easy to find, but it isn't the one I remember | |
Christine888 (talk|edits) said: | 10 October 2008 |
| Thank you for your response. However, I looked at the thread you mentioned and it wasn't for a personal residence. That is what is holding me up! | |
| 10 October 2008 | |
| there is another thread but you'll have to search for it I don't have time right now. sorry. | |
Christine888 (talk|edits) said: | 10 October 2008 |
| Thank you, thank you, thank you! I understand this is a busy time. I'm dealing with these pesky extensions too! | |
| 20 November 2009 | |
| I have a client with an interesting situation that we disagree on in my office. He sold his principal residence in 1997 and took a note for $25,900, payable in 2001 with 8% interest. He never received payment and in 2008 there is a trustee sale and he "buys" the house for his note from the trustee (which is calculated at $25,900 plus accrued interest of $21,819 and legal costs of $8,567 for a total of $56,906). He then turns around and resells the house for $56,906 (and receives cash) to the original purchaser.
Question: Does he have interest income of $21,819? | |
| 20 November 2009 | |
| Have you looked at IRC §1038(e) and the rules under Treas. Reg. §1.1038-2? My take on this is that he has interest income of $21,819, and the gain on the original 1997 sale will have to be redetermined to take into consideration the $8,567 of legal costs. | |
| 20 November 2009 | |
| I'm pretty sure we don't have to worry about the 1997 gain on sale since it was a principal residence and he bought another house with the funds (the old rules). | |
| 20 November 2009 | |
| But if you used the old rules under IRC §1034 for sales before 5/7/97, then a deferred gain reduced the basis of the client's replacement residence, and therefore, the $8,567 of legal costs should be added to basis. | |
To join in on this discussion, you must first
log in.
