Phantom Interest · Equity Carry Academy

Phantom Interest

This came up in our student zoom.

Omni Pro remembers this being a thing that came up previously.

I asked chat about seller tax implications on zero interest.

Yes — the IRS generally assumes there is interest on seller-financed deals, even if the seller charges 0% interest. This is due to the “imputed interest” rules under Internal Revenue Code Section 7872.

Ask Chat to give an example, I did on 500k/7 yr balloon and it was like 6k/yr in taxes.

To Sofias point of conservative underwriting and Bryan’s point of the both sides investor view, maybe include some interest (.5%-1%) as that may ease a potential burden and provide a pathway to close a deal.

Providing tax strategy is clearly not our role in this process.

Luis posted a good take on the benefits of a CPA vs. an Enrolled Agent.

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