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Author: GrandpaRalph Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121565  
Subject: Property Tax deduction on Land Contract Sale Date: 2/13/2010 8:27 AM
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I am selling my former home on land contract to my daughter. Both her and her husband are starting new businesses in a lousy economy, and have been strapped for cash. I recently paid some past due property tax to insure we don't lose an otherwise paid off asset, but it seems nobody can get the tax deduction for this. Even if she had paid it, or pays me back, she hasn't sufficient income to make the deduction count. And since I don't claim this house as my residence, or vacation home, or rental property, I don't think I can claim it either, right?

My daughter is beginning to believe it was a mistake to buy the house, as it sits on 6 acres, is a lot of work, and has higher overall expenses than she anticipated. Would a better strategy be to "forclose" on her so the house reverts back to me, and then rent it to them for a few years until they can get established and decide then whether to keep it or downsize?

Thanks,
Ralph
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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109088 of 121565
Subject: Re: Property Tax deduction on Land Contract Sale Date: 2/13/2010 4:45 PM
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Question:

(1) Did you obtain a note and mortgage or deed of trust from your DD and SIL when you paid the taxes? If not, there is no contract upon which to foreclose.

(2) Are your DD and SIL up to date on their mortgage payments?

Donna

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109090 of 121565
Subject: Re: Property Tax deduction on Land Contract Sale Date: 2/13/2010 5:04 PM
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Real estate taxes are deductible by the person who owns the property and pays the tax. There is no requirement that the property be used for any specific purpose, nor any limit on the number of properties for which the deduction is claimed. You may be thinking of the mortgage interest itemized deduction which is limited to a primary residence and one additional personal residence.

Ira

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109097 of 121565
Subject: Re: Property Tax deduction on Land Contract Sale Date: 2/13/2010 6:51 PM
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GrandpaRalph: "I am selling my former home on land contract to my daughter. Both her and her husband are starting new businesses in a lousy economy, and have been strapped for cash. I recently paid some past due property tax to insure we don't lose an otherwise paid off asset, but it seems nobody can get the tax deduction for this. Even if she had paid it, or pays me back, she hasn't sufficient income to make the deduction count. And since I don't claim this house as my residence, or vacation home, or rental property, I don't think I can claim it either, right?

My daughter is beginning to believe it was a mistake to buy the house, as it sits on 6 acres, is a lot of work, and has higher overall expenses than she anticipated. Would a better strategy be to "forclose" on her so the house reverts back to me, and then rent it to them for a few years until they can get established and decide then whether to keep it or downsize?"


Donna405: <<<Question:

(1) Did you obtain a note and mortgage or deed of trust from your DD and SIL when you paid the taxes? If not, there is no contract upon which to foreclose.

(2) Are your DD and SIL up to date on their mortgage payments?>>>

To the Op,, what is there to foreclose. If I understand corretly, you still have record title.

I strongly suspect that the land contract obligates the buyer to pay the taxes, and that failure to pay is a default, and that to the extent that OP paid, he/she is probably entitled to be reimbursed with interest.

If a "foreclosure" is required (because a simple termination of contract is not sufficient), then I would consider a deed-in-lieu transaction. I know nothing about the tax consequences of any of these possible actions, but the tax consequences should not be the major driver of the decisions in any event.

Regards, JAFO

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Author: GrandpaRalph Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 109098 of 121565
Subject: Re: Property Tax deduction on Land Contract Sale Date: 2/13/2010 9:18 PM
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Donna,

(1) Did you obtain a note and mortgage or deed of trust from your DD and SIL when you paid the taxes? If not, there is no contract upon which to foreclose.

No, see (2)

(2) Are your DD and SIL up to date on their mortgage payments?

No, they have not made a payment in over a year. I'm not interested in foreclosing on them to kick them out, but recognizing that their financial situation may not improve for some time in this economy, I'm trying to figure out the best path forward financially with respect to the property.

Ralph

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