Members of the Maryland Association of Certified Public...

Tax questions

April 01, 1997

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: I am selling 7 acres of unimproved land to my niece at 8.5 percent plus interest, with monthly principal and interest payments of $50 for eight years. Do I have to account for the interest on my income tax return and what form would I use if I do? Also, I am selling the land at a loss. Can I claim the loss?

A: Interest received on the installment note is taxable as received. The interest should be reported yearly on Form 1040, Schedule B. If the property adjoins your home, or has been treated as personal property in the past, the loss on a bona fide sale of the land to your niece can be claimed on Schedule D of your tax return for the year of the sale. If the land was an investment property, a trade or business property, then no loss is allowed. Additionally, this transaction should not be subject to the gift tax, if the sale is bona fide at arm's length, and free from donative intent. Be aware that transfers between related parties are subject to special scrutiny for both income and gift tax purposes.


The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

Readers can find an archive of tax questions answered thus far plus links to other tax information on The Sun's Web site --

To ask a tax question, call Sundial at 410-783-1800. Call 268-7736 in Anne Arundel County, 836-5028 in Harford County and 848-0338 in Carroll County. Using a Touch-Tone phone, punch in the four-digit code 6225 after you hear the greeting.

Pub Date: 4/01/97

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