Question

On June 1, 20X5, Father sold land to Son for $200,000. Father reported the gain by the installment method, with the gain to be spread over five years. In May 20X7, Son received an offer of $300,000 for the land, to be paid over three years. What would be the tax consequences of Son’s sale? How could the tax consequences be improved?

Answer 1

when a seller sold capital asset (immovable property) to buyer,Seller will either make capital gain or capital loss.Capital gain or loss can be short term or long term.In this qus son earned long term capital gain of $100000 since asset is held for more than 1 year that is taxable in year of transfer itself.Tax shall be imposed as per prevailing slab rate.

Tax consequences can be improved

Son should sold the property after held it for 5 years

Sell the property when burden of taxable income is low,Invest your money in retirement saving schemes,offset your capital losses against capital gains,claim all selling expenses or home improvement expenses.