Family Seller Financing Tax Planning

CPA of Denver · Work directly with Philip M. Falco, CPA

Buying a home from a relative with seller financing raises questions for both sides of the closing. CPA of Denver can help identify the tax issues to resolve before terms are finalized and define the analysis needed for the proposed transaction.

Start With the Sale, the Note and the People Involved

Identify who owns the property, who will borrow, how the buyer will use it and which parties are seeking advice. Tax questions can differ between buyer and seller. We confirm whom the engagement serves and whether separate advisers are needed before accepting work involving both parties.

Interest Terms and Possible Exceptions

The appropriate interest analysis depends on the transaction’s governing rules, dates, payment terms and property use. A family seller-financed purchase should not automatically be treated like a standalone cash loan. Review the proposed note before selecting an interest rate or assuming an exception applies.

Capital Gains and Installment Reporting

Gather the seller’s acquisition, improvement and use history along with the proposed payment schedule. A down payment, later principal payments and interest may require different reporting. Any potential home-sale exclusion needs its own review. Deferring payments does not by itself establish that all gain can be deferred.

Discounts, Below-Market Terms and Gifts

A discounted purchase price, reduced interest and later debt forgiveness are separate planning questions. Provide valuation support and explain any intended family assistance. A gift-tax filing analysis may be needed even when no immediate gift tax is expected.

Records to Gather Before Signing

Draft purchase agreement, promissory note and proposed dates.
Price, down payment, financed balance and complete payment terms.
Independent property valuation and existing debt details.
Seller basis records, improvements and residence or rental-use history.
Relationship, ownership and any planned gifts or forgiveness.

Download the one-page Before You Sign checklist (PDF). Gather records first; request secure transfer instructions before sending them.

Consultation or Written Recommendations?

The $350 consultation is a focused call within the total-time allowance described below. A written tax memorandum or detailed scenario comparison is a separate project. After a scope review, we can quote the questions, records, assumptions, deliverable and fee. Do not assume a memorandum, amortization analysis or tax return is included in the consultation price.

Tax Analysis and Closing Responsibilities

Contract and note drafting, title work, lien recording, lender consent and closing services are outside this CPA consultation. Tell us which professionals are handling those tasks. Any legal services require a separate accepted engagement. See how we work and our real-estate tax hub.

Related Family Real Estate Guides

Frequently Asked Questions

Can I book a call before the final documents exist?

Yes. Bring available drafts and identify the open decisions. We confirm whether the question fits the consultation or requires a larger analysis.

Are written recommendations included for $350?

No. Written recommendations, detailed calculations and implementation require a separate agreed scope and fee.

Discuss the Transaction Before You Sign

Review the $350 CPA Consultation for a focused discussion, with up to one hour total for document review, preparation and the telephone call. Written recommendations, detailed calculations, return preparation and implementation require a separately agreed scope and fee. Send a service-fit inquiry if you need a quote for a written analysis; identify the parties seeking advice, intended closing date and requested deliverables. Do not send sensitive records by ordinary email.

Official References

Updated October 17, 2026 · General information. Tax treatment depends on the transaction, applicable year and accepted engagement.