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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Taxes on land sale
Expert: Carole Dunton
Date: 9/1/2008
Subject: Taxes on land sale
Question
My cousin and I jointly own undeveloped land that was a part of my grandfather’s estate. We are in the process of selling this land and we are going to carry the note. As we have held this land for almost 40 years there is going to be a large amount of capital gains. The purchaser prefers to make payments to only one of us and have that person made the distribution to the other. My question is does the person to whom the payments are made to incur the total tax liability? If so what is a better way for the payments to be handled?
Answer
Hi,
The one who receives the payments can transfer half to the other and issue a 1099 at the end of the year to report the payment to the IRS and the other person.
Since the payments are being spread over time this income (both interest and principal) will be reported as an installment sale. You both need to familiarize yourselves with how to report installment sales. It would be a good idea to hire a tax professional to do your first year's return. After that you could do it youtselves.
Regards,
Carole
Regards,
Carole
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