Assignment!
How should I explain the assignment clause to sellers when putting a property under contract? I wish not to be deceptive, but 'smooth' and well-versed when communicating this clause to the sellers. To sound credible, of course. Thanks.
you have yourself explained nicely how to do it ,follow your own advice....kenmax
The strategy I use is to use some legaleze. It goes over a lot better than something like "this agreement may be assigned to another party".
Here's the exact wording I use:
"This Agreement shall be binding on and inure the benefit of the heirs, executors, administrators, assigns and successors in interest of the respective parties."
I have a question about how to account for the fee earned in an assignment.
Let's say you simply get a prop under contract and then assign it to another buyer for a fee. You never take title or anything.
How do you report this in terms of: a) in accounting terms (what would you call the account you record the income to) and, b) reporting for tax purposes. Is this considered an "asset disposition"?
I am not sure, for I haven't completed my first assignment yet. Sorry.
If you are doing this on a regular basis the I believe as a layman and not as an accountant or attorney that the IRS would likely view what you are doing as an active trade or business. This income would be reported as sales on your schedule C assuming you are not using some other sort of entity.
Schedule C income is subject to self employment tax (15.3%) as well as being taxed at ordinary income rates.
Please definatly do consult an accountant for advise. This is the only information you should rely on in the course of doing business.
GOOD LUCK