Property transactions are financial transactions that occur as part of real estate sales. For the purpose of declaring information on taxes, certain other kinds of financial events may also be considered property transactions. It is advisable to review the tax code for information and to consult an accountant if there is any doubt; the Internal Revenue Service, for example, lists debt reduction as a property transaction and requires taxpayers to declare it on their tax returns.
In property transactions, buyers of real estate transfer money to the sellers in exchange for the title. This can occur in a number of ways. One option is an outright cash payment, where buyers provide the full purchase price from their own bank accounts. Buyers can also take out a mortgage, a loan to purchase the property with the property itself as the collateral on the debt. Another option is an owner-financed transaction, in which the seller agrees to extend a loan to the buyer to purchase the property.
By law, all property transactions must be recorded in a clerk or registrar's office in order to be valid. The clerk will take down the details of the transaction and update the records to make sure they provide accurate information about who owns property in a given region. The records will also provide information about the property itself, including the boundaries, size, and zoning. Property transactions are a matter of public record and anyone can access them. Some newspapers may print lists for the benefit of members of the public who may be curious.
Other property transactions involving real estate can include events like swapping property, granting homes through wills and trusts, and selling shares in real estate. All of these transactions must meet specific legal standards and become part of the public record as well. The goal of recording property transactions is to prevent ownership disputes and determine responsibility for taxes and other expenses associated with a property. In the event a government needs to clean up environmental hazards on a piece of real estate, for example, it wants to be able to locate the owner to send a bill.
For tax purposes, property transactions can take a number of forms, and it is important to declare such transactions accurately and in detail. Failing to offer information about transactions can put taxpayers at legal risk. If a transaction is small, it may fall under the guidelines for gifts, in which case it may not need declaration and the taxpayer owes no taxes on it. If there are any doubts about the status of a transaction, an accountant can review the information and provide an opinion.
