Small Business Tax Strategies

Smart small business owners save thousands of dollars per year on their personal and business taxes by taking advantage of the legal loopholes that the government creates for their unique tax situation. Small Business Tax Strategies cuts through tedious tax code to reveal the bonanza of completely legal opportunities to grow personal wealth and secure an enjoyable retirement.  Learn more about Small Business Tax Strategies and the two free reports you’ll get when you subscribe...

Q. I sold a real estate property to my son on the installment basis. Is there any tax problem if he resells it at a gain? D.K, Casper, Wyo.

A. Yes. Under the installment sale method, generally, you can defer the tax on the sale of appreciated property if you receive payment over two or more years. But you may have to realize the deferred gain if the property is subsequently sold by a “related party.”

The taxable amount is (1) the gain realized from the second sale or (2) the remaining deferred gain from the original sale, if less. (IRC Sec. 453(e)(3))

Tip: If your son waits until two years after he acquires the property, this resale rule for related parties doesn’t apply.