Receiving Tax-free Cash Flows

Question:

I'd like to know if there is a way to account for tax-free cash flows? (for example, an individual has agreed to lend a mortgage to someone. The capital payments that this individual recieves should be tax-free.)

Answer:

You can enter up to four different years' worth in 'Other Assets'. If payments are monthly, multiply by twelve, then select a ca;endar year for each for 'Year Anticipated'. Also, be sure to select 'Other future assets' in 'Sources of Income'.

If there are more than four years of payments, then enter them as 'Additional Income' in 'Sources of Income'.

These amounts are taxed as income, so you could gross them up by a percentage such that the after-tax amount is roughly equivalent to the non-taxable payments.

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Written by RetireWare / Equisoft