I purchased a home earlier this yr on a equity split agreement
I did a sub2 on the $135K loan
made 3 payments
fixed it up and then retailed for $250K
the split was 70/30 with 30% coming to me the investor
Will the basis be $135K? How will this work out on my taxes.
Hope my question makes sense. Thanks.
the loan amounts are irrelevant. how much did you agree to buy the house for?
I bought it for $135K
then that’s your basis.
So is my capital gains on the $30K that I made or
the $250K-$135K?
$30k.
the difference between the 135 that you contracted for and the 175 cash that the seller actually received is either an increase to basis (I would argue that you actually “paid” 175) or some kind of commission or selling expense. either way it decreases your income and you’re probably safe reporting it either way.
but it’s not capital gain. it’s regular income taxed at marginal rates plus SE tax.
It appears that you purchased for $205K – $135K mortgage balance plus $70K resale profit rebated to seller.
On top of this it appears you put another $15K in fixup into the property, which brings your total cost basis to $220K. With a sale price of $250K, you have $30K profit from your flip.
Ordinary income tax plus self-employment income tax apply to the $30K.
yeah, that’s what I thought I was saying. but I messed up the math somewhere along the road.
I wish I was better with numbers…
thanks, Dave.
Thanks to both of you so much for your help.