When you assign a real estate sales contract at a higher price do you have to pay tax on the proceeds?

Question

lets say you enter an assignable contract on a home at 100 k, assign it to someone at 200 k, and the difference is cut back to you at closing, do you have to pay tax on that $100,000 profit? if so, what kind of tax is it called and how much as a dollar amount and what is the typical percentage? use the example above to explain if possible.
thanks a lot

Answer 1

That's fully taxable as a short term capital gain. Those are taxed at your margainal rate so the ultimate rate will depend upon your other income but 25% would be highly likely.

Answer 2

http://www.irs.gov/publications/p544/ch01.html - IRS Publication 544 (2006), Sales and Other Dispositions of Assets with links to many other valuable resources. Check out our financial and tax calculators at http://www.bcbsinc.com including the 1040 tax estimator.

Wayne Barney
President / Accountant
BC Business Services, Inc.

Answer 3

The full $100,000 is taxed as ordinary income, which means there is no special treatment whatsoever. It simply gets added to your taxable income for that year, and you pay whatever percentage that extra $100K falls under in the tax table.