primary residence/land contract tax pitfalls (mortgage, credit, lawyer)

[lostendound]

Hello,
I own two homes in Michigan, (could not sell the first one when the market crashed) and am getting killed on taxes on the rental property such that I cannot afford to keep the home. Moreover, that property is financed on an interest only arm that expires in Nov. 2009, so the payments will increase.

If I sell this home on land contract, say to a relative, my taxes will revert to primary residence levels. However, what are the tax implications of doing this? Can I still claim this as a loss on my income tax? My expenses on the rental are about $200 more a month than my income and they probably will be under a land contract as well. I don't want to let the home go, but I'm running out of options and am afraid I'll ruin my credit regardless.

Also, how do I set up the rental in terms of tax structure to run all of my losses through it as business expenses? Acch. This is so confusing.
Help!

[djmilf]

Lostendound, you really need to contact a professional with these questions. Try a CPA or a lawyer with experience in tax law and in land contracts. While you might get advice here, I'm really afraid that you might wind up "getting what you paid for". (No offense intended to runruddyrabbit).

The professional advice will cost you money, but you will have a definite answer that covers you legally; even if, unfortunately, you might get an answer that you don't want. Better to spend $500 or $1000 dollars now, than possibly face fines (or worse) from the IRS later.

And times are tight, you might not have the money for professional advice. In this case, you might have some very tough decisions to make.

[TaxBait]

I'd be surprised if you could even sell on land contract with a mortgage on the property. And even if its legal, how many people would be willing to make payments to you knowing if you default they're second in line after the bank.