I just negotiated a deal with the owner to buy his house which he used as a rental property for past 8 years since he bought the house. The verbal cost of buying was finalised for 245,000. No contract has been signed as yet. After talking to my friends, i asked the owner to make a contract for 250,000 and give me back $5,000 as closing costs. this will help me in getting loan on 250,000. However, the owner says that if he does that, he will have to pay capital gains tax and income tax on the extra 5,000, and so he refuses to do so, or else he says that he can pay me 3,000 instead of 5,000 to offset the cost of taxes.
Cant he show the extra 5,000 as his selling cost and not have to pay tax on it? Is there any way that I can convince him to do so. It will help me in getting a loan on higher amont and that money I can use for minor renovations.