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URL:  http://boards.fool.com/question--30744134.aspx

Subject:  question ... Date:  6/21/2013  3:04 PM
Author:  culcha Number:  118724 of 121095

DW, who has been handing our RE investments -- or mishandling them -- wishes to save a certain property from foreclosure, and has located a buyer who will buy it at a fraction of its cost, with an agreement to sell it back (at a fractional -- but higher -- price than that) in six months (by which time she believes she will be better able to handle the mortgage payments). The main reason she wants to get it back is that the people who are in there now want to buy the property in a year or so; she'd really like to sell it to those people right now, but they can't pay now....

This sounds (to me) like an expensive way of getting a loan for six months (the expense of the loan is mainly the difference between the two fractional prices I alluded to).

But one strong motivation for her to do it this way is that she received a payout when we did this. And we really need the cash.

But now I'm thinking about taxes. Should I just record it as sold --at this fractional price -- and recapture all previous depreciation; this will probably generate a pretty big tax loss. And then, assuming we buy it back in six months, do I start depreciating it all over again, and also record a new (and fractional) cost basis? That would generate a huge taxable profit when we sell it, as we plan to do.

culcha
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