Seller Credit Considered In Taxable Basis?
Tax questions here....... if I sell a property and give the buyer a "credit " at settlement toward closing costs, etc..... is the true selling price the net of the sales price less my credit - i.e. - the amount of cash I'll get at closing....
Thanks all!
Pretend you own the property free and clear and your seller "credit" is a provision of your contract.
Your NET proceeds (the check you receive at the settlement table) is the amount you use to calculate your taxable profit.
For example, let's say you sell a property for $100K, agree to give the seller $3K closing cost assistance, pay a sales commission of $6K, and various settlement costs and transfer fees add up to $1K. From your $100K contract sale price, you have $10K in selling costs which lowers your net sale proceeds to $90K. Use $90K as your sale price when calculating your taxable profit.