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Discussion Forum Index --> Basic Tax Questions --> Contingent contract
Discussion Forum Index --> Tax Questions --> Contingent contract
Nshnider (talk|edits) said:
| 31 December 2007
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| How do you handle a contingent contract ( lease with option to buy)for tax purposes for the landlord/seller and teant/buyer
Neil
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Nshnider (talk|edits) said:
| 31 December 2007
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| sorry I ment a conditional sales contract not a contingent sales contract
Neil
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Bottom Line (talk|edits) said:
| 31 December 2007
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| For a lease option, handle it just the same as a regular lease on both sides. When the option is exercised, you'll need to get a copy of the lease/option (when the deal started) and the documents that change ownership. That will let you know the basis (buyer) and selling price (seller).
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Nshnider (talk|edits) said:
| 31 December 2007
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| does the seller treat it as an installment sale? and the buyer capitalize the principle payments under the lease option to buy?
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Bottom Line (talk|edits) said:
| 31 December 2007
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| It's not an installment unless the seller is financing the purchase. Don't get bogged down in the lease option. Treat everything as a regular lease until the option is actually exercised. That is, when ownership of the property changes.
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Nshnider (talk|edits) said:
| 31 December 2007
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| actually the owner is carrying the finacing and the buyer is pay the seller a 60 month amortization schedule of simple interest. Title is not transfering untill the option is exercised and therefore I was going to treat it as a conditional sale and the seller would treat it as an installment sale. Comments
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Bottom Line (talk|edits) said:
| 1 January 2008
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| When did the lease begin? When did the ownership change?
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Nshnider (talk|edits) said:
| 1 January 2008
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| ownership does not change until the last balloon payment is made but in a land contract the same is true and that is treated as an installment sale for tax purposes
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Bottom Line (talk|edits) said:
| 1 January 2008
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| This doesn't sound like the lease with option to buy that we see in FL.
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