Lonnie Deals and Taxes

[Actor]

Unfortunately I do not have the book with me.  I loaned to someone who has not returned it.  However...

As I recall the book says that upon the sale of a mobile home you owe taxes on the profits of the deal even though you have not yet received the cash.

I've been studying accounting lately and have this question.  Would not the tax on the sale be due in the same year as the sale only if you are using the accrual method of accounting?  If you are using the cash method wouldn't you owe tax only on money collected?

As far as I can tell the IRS requires you to use the accrual method only if you have an inventory and sales of over $100,000 per year.  Although a Lonnie dealer might well make over $100,000 I doubt he could be regarded as having an inventory.  At any rate I doubt a newbie would make $100,000 in his first year.  Therefore could not a dealer use the cash method and pay taxes only on money collected?

[Gold River]

Hi,

    Are you refering to "Owner Financing"?


         GR

[Actor]

Hi,

    Are you refering to "Owner Financing"?


         GR

I suppose you could call it that.  An example would be buying a home for $1000 and selling it for $4000.  That's $3000 profit.  According to the book you owe the taxes on that $3000 when you file your return the next year.  That's true if you use accrual accounting.

But if you use cash accounting then profit is the difference between the amount you actually paid out and the amount you have actually collected.  In the above example you have paid out $1000 cash.  If the buyer gives you $500 down in December and does not make his first payment until January then the deal is a $500 loss as far as taxes for the year of the sale are concerned.  If you collect $200 per month the following year then you have $2400 profit for that year.

I'm not trying to make a point.  I'm asking a question.

[henryperez123]

I don't understand these accounting concepts is there any website or e-books which helps me deal with that?