Wraps - The 'Hunt' for an Escape of Mortgage over Basis

Article Abstract:

According to the Internal Revenue Code, when a seller issues a mortgage to the buyer of his real estate, if that mortgage is in excess of basis or the sellers cost, that excess is considered a payment in the year of sale and is taxed that way. Two important cases support this ruling. The case of Frank Hutchinson brought the idea of a wrap around mortgage to the Tax Court. The court studied the wrap and its effect on mortgage in excess of basis for installment purposes. In the case of D.A. Hunt, the Tax Court ruled that in the installment sales rule, a payment is not made when there is a mortgage in excess of basis and a wrap around mortgage is used. Recently, the Installment Sales Revision Act of 1980 was passed which changes some of the provisions in this section of the Internal Revenue Code.

Laws, regulations and rules

---

Recent Tax Rulings on AMIs

Article Abstract:

Alternative mortgage instruments (AMIs) were designed to combat the mismatch problem of lenders. The attractivess of these mortgages are affected by the tax treatment of interest. The payments and interest deductions on graduated payment mortgages (GPM) are less than fixed mortgages. The tax treatment of price-level adjusted mortgages will likely be similar to GPM's. Shared appreciation mortgage interest deductions are only available to cash-basis taxpayers when paid. Zero-interest mortgages have a ten per cent deductible interest portion.

Economic aspects, Interest rates

---

Recent cases and rulings clarify activity determinations and other issues

Article Abstract:

An IRS letter ruling on real estate professionals' passive activity limitations, along with the Tax Court's Chapin, Wiseman, and Machado decisions, were the major developments in passive activity taxation during 1995-1996. Activity determinations, material participation, self-charged interest, and income characterizations were among the issues addressed in Tax Court cases or by IRS Tax Advisement Memoranda.

United States, Cases, Real estate agents, Real estate agents and brokers, Passive activity (Taxation)

Similar abstracts:

• Abstracts: The scope of the Van Dusen rule in federal-question transfers. The effectiveness of an unpublished rule
• Abstracts: The constitutional contours of race and politics. Charter schools, equal protection litigation, and the new school reform movement
• Abstracts: The scope of pro football's antitrust exemption. Back to the drawing board. Web resources for tax professionals: update 2001
• Abstracts: In defense of the sales statute of frauds and parole evidence rule: a fair price of admission to the courts. Courts and free markets: perspectives from the United States and Europe
• Abstracts: International Aspects of the 1983 Social Security Amendments. Security: SecurePrint

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.