selling rental to family

[jaclou]

Hi, I am moving 1000 miles from a 4-plex I own. I want to sell and my brother in law and sister want to buy. He does not want to make much if any down payment. I trust him and my sister. I am willing to carry note. I was thinking of making him a 15 year loan with zero down and 5-6% int. at or near asking price ( I would get title company to do mortgage).

I am not crazy about getting cash tied up this way at possible lower rate if interest rates go up.

I was thinking I could just carry down payment and have him get a 30 year loan from bank for balance.

Anybody know better way to sell? I mean to sell to family...LOL

Also I have owned 4-plex since 1985 and it is paid off.

I bought for $87,500 and have taken $100k in deprecation over the years, selling price is $185,000.

I understand I would owe only 15% cap gain rate on sale price with no recapture on deprecation, is this correct?

Also if I did installment sale and carry the mortgage I understand I would pay my full tax rate on interest portion of payment and 15% cap gains on principle portion.

If the rate on capital gains changes in the future is it normal for deals done in prior years to stay at old rate or does new rate apply..

thanks for any help or advice.

jaclou

[thomtax]

$100K in depreciation?

Without going into the rest of the post, I am confused as to how you took $100,000 in depreciation when you only paid $87,500 for the units. Also, how did you get this much in such a short period of time?

LT

[Lion]

Questions

Your post brings up a lot of unanswered questions. What is the land value? Did you live in one of the four units and rent the others? And, the depreciation question already asked.

[jaclou]

deprecation over the years

I just added up total deprecation since 1985. This includes some dep for improvements over the years. I should just say the building is fully dep. Land value is low because of small lot, I did live in one unit for first 2 years. When I bought the old tax laws had around 18 yr dep.

I normally would be asking my tax guy these questions but he had a death in family and spring break and end of tax year this past week so he is kinda tied up

[taxea]

selling rental to family Reply to Thread

First thing I would do is advise the girlfriend that this is not a good deal for her. Her money is going into this transaction but her name is not on the deed or the mortgage. What are her quarantees if she splits with the son.
Also isn't this some kind of property tax fraud...taxea