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New Tax Law Crimps Retiree's Loan Income

October 25, 1987

A section of the new federal tax law has created a most unfair situation for many elderly people who now find their retirement preparations reduced to chaos.

For many years, people like me saved to purchase income property with the idea that at retirement age the property could be sold and first mortgage paper could be held to help support us through the leaner retirement years. But not now!

Now a person can sell, sure, but one must pay the Internal Revenue Service up front (the very first year) that amount owed from the capital gains of the sale. Unless a person can get a healthy down payment, enough to pay off the present mortgage and IRS the first year, it is unlikely one is able to hold mortgage paper.

In previous years, one could pay the IRS as the money was received. Some from the down payment received on sale of the property and some from the first-mortgage paper principal and interest over the term of the mortgage. That program is now over, thus creating the hardship.

We should be able to hold the mortgage and reap the benefits of amortization the same as the banks and savings and loan associations. Instead we must settle for simple interest, in one of those banks or savings and loans, on the money that is left over. Pretty unfair to the retired person who has planned ahead, but the banks and savings and loans, they love it.

CHARLES R. WILLIAMS

La Puente

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