I bought a 2/1 from owner for $71,000 for no money down, pmts for 24 mo then a balloon. RMV is approx $90,000. Now with it i got two extra lots that are north and south of the 2/1 lot. I have a possible buyer now for the lots. And i need to know how the sale will work. Since the lots are owned free and clear and now mine, when i sell that makes the income taxable for me?
The seller is no longer part of the lot deal? Now its all me?
I have only bought property, not sold any yet so bear with me.
You got a package deal on a house and three lots. The seller carried the financing. Are you sure the two extra lots are not included in the collateral that secures the loan?
The seller has sold to you for $71000 and whatever profit he made on the sale was taxable income to him. The seller is not a principle in your sale, so when you sell the lots, your profit is taxable to you.
If the lots are included in the collateral that secures your loan with the original seller, then you will probably need to get a release of lien from your seller. To release the lien on the two lots, the seller may require you to use some or all of the proceeds from the sale to pay down your loan balance. Even if you use the profit from the sale to pay down your loan balance, the profit is still taxable income to you.