Real Estate Terms

Installment Sale Benefits
By taking the proceeds from the sale of your home or property in installments, you can defer a portion of the capital gain tax and enjoy a monthly income with a typical interest rate range of 10%-11%, using your residence as collateral.

Land Contract
A land contract, also referred to as "contract of sale," is an installment-type contract between buyer and seller of your home or property, providing for periodic installment payoff of the purchase price while the seller retains title to the property or home as security for payment of the purchase price. The seller agrees to convey legal title of the house or property to the buyer at some future date upon fulfillment of certain conditions. During the term of the contract, the buyer has an "equitable ownership" in the home or property.

$250,000 / $500,000 Exclusion (1998)
This exclusion refers to avoiding tax on the sale of your principal residence. You may exclude from income, up to $250,000 of gain realized on a sale or exchange of a residence, if you owned and occupied it as a principal residence continuously for at least two years out of five before the sale or exchange. If you are married and filing jointly, you may be able to exclude up to $500,000 of gain. The exclusion is not a one-time benefit. As often as you meet the applicable ownership and use tests, you may claim the exclusion on sales of principal residences.

Principal Residence
A principal residence is not restricted to one-family houses. It also includes a mobile home, trailer, houseboat or condominium apartment if used as a principal residence. An investment in a retirement community does not qualify as a principal residence unless you receive equity in the property. In the case of a tenant-stockholder of a cooperative housing corporation, the residence ownership requirement applies to the ownership of the stock, and the use requirement applies to the house or apartment that the stockholder occupies. If you sold stock in a cooperative housing corporation during the five-year period ending on the date of sale, you must have owned stock for at least two years and used the house or apartment that the stock entitles you to occupy as your principal residence for at least two years.


1031 Exchange

What is a 1031 Exchange?
Under IRS Code Section 1031, no gain or loss is recognized if property held for productive use in trade or business or for investment is sold and the sale proceeds are used solely to purchase property of a like kind to be held either for use in trade or business or for investment. Paying taxes on your gain can be deferred indefinitely depending on what you do with the property that you purchase through the exchange.

What is a 1031 Reverse Exchange
The IRS now recognizes a taxpayer’s right to acquire a like kind of property using a reverse 1031 exchange procedure before selling the property, which is the subject of the exchange. Again, the payment of taxes on your gain can be deferred indefinitely.