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A C corporation is involved in purchasing tax lien certificates from counties. Does somebody knows how should be structured this tax return?

archa5
Level 1

A C Corporation is involved in purchasing tax lien certificates from counties. Does somebody knows how 

should be structured this kind of return?

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BobKamman
Level 13

Just report the interest.  It's not inventory, although sometimes these are bought and sold in a secondary market.  And if it gets converted to property through foreclosure, the cost of the certificate is part of basis.  

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George4Tacks
Level 15

They would be purchasing non depreciable assets.

 


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archa5
Level 1

The counties are reporting the interest income when the certificate is redeemed.
Is it enough for the corporation to show the income which is received as the corporate profit or it is necessary to show the purchase price of the certificate and the money received back from the county. The difference will be the interest reported by the county with one small problem that we will have as a difference between gross receipt and cost of goods sold and the county report it as a blank interest. 
Which way to go?

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BobKamman
Level 13

Just report the interest.  It's not inventory, although sometimes these are bought and sold in a secondary market.  And if it gets converted to property through foreclosure, the cost of the certificate is part of basis.  

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archa5
Level 1

Thanks a lot Bob.
This is what I have on my mind.

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archa5
Level 1

Thanks again.

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