sale with contract for deed.

Dear 1031x: My mother sold 62 acres of land on a contract for deed eight  years ago.  She originally paid $19,200 for the property.  The individual  now wants to sell the property for $48,000.  She is 81 years old and a  resident of South Dakota.  She also owns 12.2 acres on which she lives.  What will her total capital gains tax be and as a senior citizen are there  ways that she can invest this money to avoid the taxes.  For example, she  needs to replace her septic system and make repairs to her home. Thank you for your help.

Dear S:  Generally, selling a property on contract for deed only postpones the taxes due until the money is received.  It is treated for tax purposes as an installment sale.  Right now it seems like your Mother is getting paid off.  When she does the income taxes will be due and there is nothing that can be done about it.  It is too late to do a 1031 exchange.  Also her age is of no benefit.  I am afraid she is just going to have to pay the tax.  On the other hand, when she decides to sell her home and 12 acres that should be tax free.   Let me know if you need more. 

Steve Hickox
Attorney / President

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