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Subject:  Re: Property Tax deduction on Land Contract Sale Date:  2/13/2010  6:51 PM
Author:  JAFO31 Number:  109097 of 130714

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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