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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Re: My Seller Carry Back Went Bad, Carry Loss Forward Taxes? Posted by dond on December 09, 2009 at 6:10 AM In Reply to: My Seller Carry Back Went Bad, Carry Loss Forward Taxes? posted by notconor on December 08, 2009 at 9:01 PM : I want to know if I can carry forward a loss on a seller carry back note? And if so whats the accounting for taxes and IRS? : : (Disclaimer: No reply postings will be taken as advice, merely conjecture.) : : I have a seller carry back note on a property that I flipped in January of 2007. The market was crashing and no lender would do a 2nd, so I carried the 10%. (Oddly the lender that did the 1st closed its doors the day after funding!) : As an Example: : The house was sold and most of the invested money was paid back except for $2,000, which is tied up in a seller carry back. 2nd TD note is $32,000, 10% I/O and the actually cash invested is $2000. Thus a $30,000 profit paid over 10 years. : This is a California Purchase, so no Recourse. 1st Foreclosed, borrowers went CH 7 then AWOL. Lets say they made $750 worth of payments. : I have not spoken to a tax accountant and am interviewing some now, and I hope to have an answer so that I can gauge the knowledge of the accountants. : I have not been able to find an answer online, as you can imagine most online info is geared towards the defaultor not the defaultee. :) : I figured there are others out there pondering this... I'm rusty at this, but here is the general process: 1. Calculate your basis in the note. Thats the original basis in 2007, minus any principal payments you have received. (Interest is taxed as ordinary income, and is not relevant here). 2. Determine your acquisition date for the note and the date when it became worthless. The difference is your holding period and that will tell you whether you hav a short term or a long term capital loss. 3. There are some messy rules about how you combine short term gains, short term losses, long term gains, and long term losses. 4. Whatever falls out the bottom is a short or a long term loss (probably). 5. Now you offset the loss against ordinary income. Any unused loss can be carried forward. Here I am really on shakey ground, but I think the maximum carry-forward for federal is about 15 - 20 years, and for California it is about 5 years. The California carry-forward may have been temporarily suspended. One more bit of advice. Your problem is fairly complex, so I would go to a CPA or an Enrolled Agent, not a California licensed tax preparer. Dond Follow Ups: Post a Followup: Name : E-Mail : Subject : Comments: : : I want to know if I can carry forward a loss on a seller carry back note? And if so whats the accounting for taxes and IRS? : : : : (Disclaimer: No reply postings will be taken as advice, merely conjecture.) : : : : I have a seller carry back note on a property that I flipped in January of 2007. The market was crashing and no lender would do a 2nd, so I carried the 10%. (Oddly the lender that did the 1st closed its doors the day after funding!) : : As an Example: : : The house was sold and most of the invested money was paid back except for $2,000, which is tied up in a seller carry back. 2nd TD note is $32,000, 10% I/O and the actually cash invested is $2000. Thus a $30,000 profit paid over 10 years. : : This is a California Purchase, so no Recourse. 1st Foreclosed, borrowers went CH 7 then AWOL. Lets say they made $750 worth of payments. : : I have not spoken to a tax accountant and am interviewing some now, and I hope to have an answer so that I can gauge the knowledge of the accountants. : : I have not been able to find an answer online, as you can imagine most online info is geared towards the defaultor not the defaultee. :) : : I figured there are others out there pondering this... : I'm rusty at this, but here is the general process: : 1. Calculate your basis in the note. Thats the original basis in 2007, minus any principal payments you have received. : (Interest is taxed as ordinary income, and is not relevant here). : 2. Determine your acquisition date for the note and the date when it became worthless. The difference is your holding period and that will tell you whether you hav a short term or a long term capital loss. : 3. There are some messy rules about how you combine short term gains, short term losses, long term gains, and long term losses. : 4. Whatever falls out the bottom is a short or a long term loss (probably). : 5. Now you offset the loss against ordinary income. Any unused loss can be carried forward. Here I am really on shakey ground, but I think the maximum carry-forward for federal is about 15 - 20 years, and for California it is about 5 years. The California carry-forward may have been temporarily suspended. : One more bit of advice. Your problem is fairly complex, so I would go to a CPA or an Enrolled Agent, not a California licensed tax preparer. : Dond [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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