I finished an interesting consulting call on new hot topics that has recently come up and is the purchase of notes in the market ...
Original publication date on the United States Real Estate Forum on Facebook:
2019-01-04T17:44:14+0000
I finished an interesting consultation call on new hot topics that has recently come up and is the purchase of notes in the American real estate market.
I wanted to clarify a certain lack of clarity -
It is true that in general, when you purchase a property in 60 but sell in 100 - you have a capital gain of 40.
But in the case of buying a "debt instrument" - there is actually another set of rules that overrides the default rules
Market Discount on Bonds -IRC 1276-1278
https://www.law.cornell.edu/uscode/text/26/subtitle-A/chapter-1/subchapter-P/part-V
By and large, they will come and say that if you bought a debt at 60 when its face value is 100 - it is not a capital gain (which for Israeli foreign investors can be tax-exempt in the US) but it is interest income.
If we take a slightly more complex example, suppose you bought a loan in 60 for two years (its nominal value is 100). And after a year you are selling the loan on 90
You have an economic profit of 30 - this is true but the division of this will be:
20 will be classified as interest income
10 will be classified as capital gain (with the possibility of tax exemption in the US for a foreign resident)
I believe that in Israel too - this will be classified as interest income from discount fees (up to 25 per cent for those with whom it is not a business)
26 US Code Part V - SPECIAL RULES FOR BONDS AND OTHER DEBT INSTRUMENTS
1986-Pub. L. 99-514, title XVIII, § 1899A (72), October. 22, 1986, 100 Stat. 2963, inserted "on bonds" after "discount" in item for subpart B.
The responses to the post can be read at the bottom of the page and join the discussion
Ok I understood more. That is, if the total payment on the house is 30K + interest, and he stopped paying after 15K the interest I received you did not calculate as the principal payment… he still owes 15K on the principal. makes sense.
Or Or Stern Noel
No customer pays ... this is the Nawat you hold ..
Which, but what happens if the customer did not pay the total amount?
exciting
Is there no difference between Nuwete paying without paying?
Very interesting which !!! There is another buyer: if you buy a discount loan let's assume 100 debt and buy at 85 pay a tax on each payment (PMT) as if we purchased PAR (at 100) and our purchase assumption is not embodied for the duration of the loan holding period. On the day of the sale it is offset so that in effect a tax rebate is earned.