Contract For Deed Or Land Contract Taxes
Scenario: Seller(me) signed land contract March 2004. Buyer will refi in 6 months. Received(big) down payment money March 2004. Bought house last August 2003.
Hoping that I can claim long-term capital gains because title has not yet transferred?
What do you think?? Any help would be appreciated.
As a side not I WAS(and still may) going to claim this as a short term capital gain, but then the escrow officer told me that all her clients report the down payment when the buyer refi's, because it's not a sale until title is transferred. She said the buyer could default then you would have re-fill your.
Any thoughts???
In my view, your profit is ordinary income reported on Schedule C. Self-employment taxes are calculated on Schedule SE.
Incidentially, as far as the IRS is concerned, you property was sold in March 2004 when you entered the land contract. The escrow officer is wrong if you are depending upon her for tax advice.
Best to also confirm whether your state law requires a judicial foreclosure proceeding if your buyer defaults on your contract. Consult a real estate attorney experienced with foreclosures.[ Edited by DaveT on Date 03/24/2004 ]