How To Distribute Gain To My Partner?
I do not know the answer to your question. But .... when I have a partner, we make sure that his profits are distributed on the HUD1 Settlement statement. So if the profit is 60k, there will be a 30k distribution to Investor1, and then the proceeds to seller (investor2) only says 30k.
Actually, prior to closing, my partner and I get the HUD1 closing costs, the HUD1 from the purchase, all costs and who paid for what, and figure out what each partner's check should be cut for. So the actual split of the seller proceeds would not be a 50/50 on the HUD1. But you get the idea of putting the profit on the HUD1. This is nice because I take the HUD1 to my accountant for taxes so even if I forget all the details, I only show the actual profit that I made.
Brenda
Confused,
You can go the 1099 route.
I see no reason to even try to take the full gain on your return and then gift some amount to your partner.
Let each person sort their tax returns as they see fit. Decide on a profit split and then pay out the money as per the split. If it is 50/50 then that is what it will be before tax.
If the two of you wanted to reinvest or something like a 1031 then organize that up front.
BTW - Even if both are technical possible, I speculate (pure speculation) that the gift idea will attract more attention re: audit.
Do see professional advice as a general rule. Picking someone out of the phone book who is lowest in price is not a good selection criteria. Check with a local RE investor group as to who is recommended as a tax advisor/preparer. Normally there is one or more people that have clear experience with creative RE transactions and tax returns.
John
[addsig]
[ Edited by confusednovice on Date 09/14/2004 ]
Hello, I am in a similar situation. I have bought sveral lots in one transaction 50/50 with my name on deed 1 month ago. Now I have a buyer and hate to refuse the offer. If I save and sell 1 lot for 1 year and 1 day and sell the rest with a closing in 2 months, Can this put me in the 15% area or lower? since I have not closed on all of them and that would make the final transaction 1 year and 1 day. I have no idea at this time what tax bracket I will be in. Can you explain that 1099 a little more as I also will be 50/50 as that seemd the way to go.
Sherry