Question

An investor has owned a rental property for many years but is now interested in selling it for retirement income. Another investor has offered to buy the property for $20,000 down, making $10,000 payments for each of the next ten years. The original investor would be able to postpone paying capital gains tax under this

Answer 1

The investor can defer capital gains tax on the rental property by selling it through an installment sale, offering potential benefits similar to other real estate investment scenarios.

Step-by-step explanation:

An investor who sells a rental property using an installment sale, where the buyer makes a series of payments over time, can defer capital gains tax until the payments are actually received. This can provide the seller with a stream of income for retirement purposes. The scenario presented is similar to the examples provided:

Freda who bought a house for $150,000 in cash and it's now worth $250,000, Frank (or Ben as mentioned early in the prompt) who bought for $100,000 with a 20% down payment, with the property now valued at $160,000 and $20,000 paid off the loan,

The general 20% rule for down payments on a mortgage to avoid mortgage insurance, The concept of a mortgage as a line of credit requiring down payments, And the lesson on inflation's impact on future value of money, such as Rosalie the Retiree's one-time payment, losing buying power over time.

These scenarios exemplify typical real estate investment and financing strategies often considered by investors at different stages of property ownership and life situations.