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by ALEXANDER VEKSLER on November 6th, 2004

ALEXANDER VEKSLER

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I gave a private mortgage to a buyer who bought my house, but then the person never paid the mortgage. Do I still have to pay capital gains tax on the full amount I sold the house for even though I did not receive the full payment?

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  • by clevergirl on November 27th, 2004

    clevergirl

    You only have to pay tax on income you have "effectively" received, so you should be free of tax obligation on payments not received. You need, however, to make visible and apparent efforts to collect the unpaid portion if you don't want the IRS to decide that you knowingly made a gift of the unpaid amount to the buyer, and may not have intended to collect in the first place. And don't think they haven't made that decision before!!

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