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March 27, 2024
Question

Capital Gains on an Installment Real Estate Sale

  • March 27, 2024
  • 1 reply
  • 0 views

I bought a house in October 2023 and plan to sell it in April or May 2024. 

 

I'm considering doing an installment sale, reported on IRS Form 6252. The buyer would pay $100,000 down and about $4,000 in interest in each month on the remaining balance. Then in January 2025, they'd pay the rest, about $800,000.

 

The $100,000 I receive at the time when the title is passed would clearly be taxed as a short-term capital gain. Does that short-term capital-gain rate get locked in for all profits of the sale, even though I won't be receiving payment of the remainder until 2025?

i.e. if I structured the sale this way, do I still pay short-term capital gains on the $800,000 I would receive in January 2025, which is more than a year after I bought the house.

 

Thanks!

 

 

    1 reply

    March 27, 2024

    yes . the taxability as short-term or long-term gain is based on the purchase and sales dates of the property not when you receive the proceeds.

     

     

     

     

    Critter-3
    March 27, 2024

    The sale itself is short term and all cap gains will be considered short term even if you have an installment sale spanning decades.