Rental Property or Installment Sale?
Posted: 30-Jun-2020 8:37am
Wealthy client owns a residential property in personal name that was acquired in 2018 via 1031.
Employee of the client's S corp lives in the property and makes a monthly payment. There is nothing in writing regarding the arrangement but evidently there is a verbal that once the employee has paid a certain amount, which is still to be determined, my client will transfer title of the property to the employee.
In substance perhaps we have an installment sale, but again there is nothing in writing and the deed to the property will stay in my wealthy client's name until a certain amount (tbd) has been paid. I was just made aware of this arrangement and when I prepared the 2018 tax return, I treated this property as a rental. Client is saying they don't want to treat it as a rental on the 2019 return but as an installment sale.
Any thoughts out there on this situation given the facts above?
Employee of the client's S corp lives in the property and makes a monthly payment. There is nothing in writing regarding the arrangement but evidently there is a verbal that once the employee has paid a certain amount, which is still to be determined, my client will transfer title of the property to the employee.
In substance perhaps we have an installment sale, but again there is nothing in writing and the deed to the property will stay in my wealthy client's name until a certain amount (tbd) has been paid. I was just made aware of this arrangement and when I prepared the 2018 tax return, I treated this property as a rental. Client is saying they don't want to treat it as a rental on the 2019 return but as an installment sale.
Any thoughts out there on this situation given the facts above?