What are the tax implications if purchase price and sale price is different for a home?

I'm in the process of making a decision on a purchase of a short sale. There are two lenders that hold a lien on the property. My purchase price offer of $400k has been accepted but this is what I'm hearing from my realtor: 1. Sale price on the home needs to be filed as $350k. This will go to the first, primary lender. 2. $50k will be handled in escrow as well but considered a non-occurring closing cost item to the seller. *Supposedly this is to pay off the second lender - but not 100% sure. Is this normal? Although I'm paying $400k in total, my equity will go down immediately because, in record, the home sale is for $350k. What are my tax implications? If I later sell the property at $400k, will it be considered a $50k gain or a "no loss / no gain"? I intend to hold this property for at least 3-5 years and don't want to flip it but I want to get some advice before I pull the trigger (one way or another)

1 month ago - 1 answers