How do I show seller financing of vacation home?

I'm modeling the decision to sell a vacation home for cash or with seller financing.

Comments

dan royer's picture

You can adjust the real estate commission in the Assumptions area in the last tab "other."

You could also make an adjustment with a simple special receipt or expense, but that's less convenient because you'd need to calculate that amount on the side and enter it for the year of the sale.

Thanks, Dan. I guess I wasn't explicit enough. I'm considering either a cash sale or providing term financing to the buyer. Commission'd be the same in either case, I'd presume. Hoping to see the cap gain tax savings if spreading the sale over multiple installments.

Hi, In the case of selling with financing where you can spread the capital gains tax, I'd model the sale price as involving no capital gain, but treat the receipts from the financing as special receipts subject to capital gains tax. If you think this doesn't cut it, please call me to discuss -- 617 834 2148. My best, Larry

Thanks for your reply Dr. Kotlikoff. (Pleased to see your hands-on involvement in this enterprise!) Your suggestion confirms my expected data entry plan. I've gone ahead and setup a (fairly) simple spreadsheet model to make the seller finance vs cash sale decision. Once the sale closes I'll use your approach to enter the results into my ESP; enter the taxable portion of installment payments as subject to capital gains tx and the remaining portion (return of basis) as non taxable.

Best I can tell, if I offer a 20% down, 12+yr amortization for balance, I should be able to avoid 80% of the cg tax.

Does my interpretation of your suggestion make sense?
Thank you again, John