moneynfast 0 Report post Posted January 24, 2003 Do we have to worry about capital gain being in the lease purchase option business? Michael Share this post Link to post Share on other sites
MichaelC 160 Report post Posted January 25, 2003 Yes, taxes are a part of the reality we must deal with. There are so many factors that affect every individual that I can't say what may happen to you as an individual, Michael. My best advice is to keep detailed and thorough records of all expenditures and income, and make a point of speaking with a qualified professional in this area, sooner rather than later.Truth is, Michael, I hope you pay a boatload of taxes. Means you're making three boatloads of moolah ! Share this post Link to post Share on other sites
Dave T 0 Report post Posted January 25, 2003 Do we have to worry about capital gain being in the lease purchase option business? Michael MichaelR, Your question is a little vague, but let me try to give you some general guidelines. In the lease option business, there are multiple streams of income -- option consideration, rent, and sale profit. Each has its own tax treatment. The option consideration you collect is treated as ordinary income only when the option expires. It is not taxable until the option expires. If the option is exercised, then the option consideration is included as part of the sale proceeds from which your taxable gain is calculated. The rent you collect from your tenant buyer, is reported on Schedule E and taxed as ordinary income during your option period. The backend profit on the sale when the option is exercised is a taxable capital gain. Also, depreciation recapture needs to be considered, though its effect is probably minimal if your option period is only a couple of years. Hope this helps. Share this post Link to post Share on other sites
-Tony- 0 Report post Posted November 8, 2007 its almost this time again....man I love to go to the very last page of post and pull one up. funny thing about this is I had a slo in my llc and it went like Dave said but the way I had my LLC set up it was just added to my personnel income. I don't know that is how my accountant did it and I didn't have to pay but $700.00 that year. that year I was still in the Air Force (I think I qual'd for food stamps) and made 18k on the backend, in fact it was my first slo deal. Share this post Link to post Share on other sites
<Steve> 82 Report post Posted November 9, 2007 . . . so DaveT can the expenses for the L/O property be writen off. advertsing, milage, supplies etc... For example: I collect the full rent but my profit is say 20% of the rent amount each month, the rest goes to the seller. Is the amount of the rent going to the seller a write off (ie. expense)? And what kind of expense woud you call it? Or, do I only report my profit (20%) of the rent as income? Thanks Share this post Link to post Share on other sites
