What is the name of your state (only U.S. law)? NE
I've been living in a home that my parents own and renting from them. I'm ready to move to another location, and they are old enough that they don't want to do a 1031 exchange for another rental property. I realize that they would be responsible for the capital gains tax when the house is sold, which is going to be about $40,000. My question is this: We've discussed the possibility that they would do a 1031 exchange on a house that I would select, then enter into an agreement with me so that I would pay them the purchase price of the new home in installments. Basically, it would be a seller financed deal, so they could spread out the gain (and getting interest payments from me in the process) over a period of time. Would there be any other way around the capital gains tax / does this seem like a smart option? I realize if the purchase price of the new home is less than the realized gain on the sale of the currently owned home, they would be responsible for the gain on that amount in the first year, but spreading out the gains tax in installments seems like a better option. Also, since most likely my debt to them will be longer than they will live, how would this agreement affect the probate situation(and any tax consequences) when that occurs? Thanks in advance.
I've been living in a home that my parents own and renting from them. I'm ready to move to another location, and they are old enough that they don't want to do a 1031 exchange for another rental property. I realize that they would be responsible for the capital gains tax when the house is sold, which is going to be about $40,000. My question is this: We've discussed the possibility that they would do a 1031 exchange on a house that I would select, then enter into an agreement with me so that I would pay them the purchase price of the new home in installments. Basically, it would be a seller financed deal, so they could spread out the gain (and getting interest payments from me in the process) over a period of time. Would there be any other way around the capital gains tax / does this seem like a smart option? I realize if the purchase price of the new home is less than the realized gain on the sale of the currently owned home, they would be responsible for the gain on that amount in the first year, but spreading out the gains tax in installments seems like a better option. Also, since most likely my debt to them will be longer than they will live, how would this agreement affect the probate situation(and any tax consequences) when that occurs? Thanks in advance.