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USA | Talked to more than one lender couple years ago about the amount of income tax liability that was being created with higher land purchase costs, that doesn't show up on the balance sheet. Got the blank deer in the headlights look from the majority.
About year 10 on land loans could get pretty tuff for some to handle as the tax liability issue comes home to roost in a much bigger way every year. My guess more than one loan will need to be reworked as there won't be enough income to pay the income tax and required principal payment.
Need to add about 65% to the selling price of land , to provide enough income to pay the income tax and purchase cost of the land.
$5000 land =$8250 acre income tax and principal
$10,000 land= $16,500 acre
$15,000 land= $24,750 acre.
Edited by coup 11/8/2015 06:09
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More now vs. then
