What To Do When You Sell and Finance Your Buyer & You "Get It Back"

let me know if you got it now.

Mike,

When you have a minute, I need some help in Investor Books with installment sales. (I’m just getting 08 taxes together --- and I’m discovering I only have a 6 month memory span)

Here’s the deal. I sold a property on contract in April 2008.
$4,000 down,
$79,900 purchase price.
I set it up just like you show in QB.

Installment sale, new loan, etc

Well, as usual, I got the property back a few months ago (in 2009),

and now have it rented (with option)

Can you tell me how to “undo” the sale.

#1 Larry.... well, let's do a "before we get started" thought... because i went through the exact same years ago, and it has happened many times since.

Okay, now #1... let's take a brain dead simple look at the chronological order of events involved.

April 2008, Larry sells 123 main st. for $79,900.. with 4k down - Yeehaw!

- this means 4k towards purchase using Installment Sale method and the balance of 75,900 (plus whatever) is seller financed..

- you enter your sale of asset as described. and ZERO out your Fixed Asset account for the property SOLD. Now you would no longer own it.

April 2009, after defaulting you get the house back.

in the real world, you actually purchased the house back from them for the balanced owed. Although you did not state the balance owed you with late charges, fees and anything else you wished to tack on... You actually Purchased the house for say... $76,000 "subject to" your existing 1st mortgage loan already on the property.

How to Do This.... THINK SIMPLE

You SOLD it in April 2008. ... gone, adios, bye bye...

If you try to "undo" it, this is a major no-no and probably could be considered some kind of crime... because You are trying to erase a Taxable event of the sale of a piece of real estate. You can NOT "undo" it..

Therefore, when they "give" it back to you, You are actually BUYING another house.... it might be easier to think of this situation as if you were an investor and these Sellers called you.... You agree to buy it for the balance owed to the lender (larry) along with buying it "subject to" the existing 1st mortgage already in place....

I really believe this will help you figure it .... Just NEVER think about "UNDOing" something... just properly document it in chronological order and you got it.

.

For example, do I just show it as acquiring a new asset at the original price and set up a new class OR just move the old asset and class back to where it was.

I still have a loan that I owe on the property.

Thanks

Larry Kite

Great question Larry,... i feel your pain again... although a long time ago, you just tore off that scab on that old would...

keep on Cranking Larry.