Tax Tip of the Week*

INTEREST ON BUY-OUT
It is not unusual for a property distribution payment to be stretched out over some years, and in that case it is also not unusual for there to be interest paid on the outstanding balance (sort of like on a mortgage). While it is clear that the principal payments are tax free, that is not the case with the interest. If there is interest stated on the installment payment of the property distribution, that interest is taxable income to the recipient. Interestingly, it may or may not be deductible to the one making the payments – that depends on a number of complex tax factors.