Home Page link  

Is this to be claimed as income?

  
Groups | Search | About
User Password
Register Now! Lost Password?

Taxes General Forum - Tax professionals meeting place and answers to queries. (Moderated)

 Post an article  get this group's latest topics as an RSS feed add this group's latest topics to your My MSN content add this group's latest topics to your My Yahoo content  add this group's latest topics to your Google content  YahooMyWeb Yahoo!  Google Google  Windows Live Favorites Windows Live  del.icio.us del.icio.us  digg digg  Add to Netscape Netscape
Subject Author Date
Is this to be claimed as income? ollie24018 03-21-2008
Posted by ollie24018 on March 21, 2008, 8:46 pm
Please log in for more thread options
 My son had a signed contract to sell his property. The buyer wanted
desperately to get out of the contract for the house and paid him a
sum of $15,000 to release him from this obligation. This just
happened this week. The contract was voided and all went on their way.
My son asked if he must claim this $15,000 as income when he files his
return next year.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Bill on March 21, 2008, 11:10 pm
Please log in for more thread options
ollie24018@yahoo.com posted:

>My son had a signed contract to sell his
>property. The buyer wanted desperately to get
>out of the contract for the house and paid him
>a sum of $15,000 to release him from this
>obligation. This just happened this week. The
>contract was voided and all went on their way.
>My son asked if he must claim this $15,000 as
>income when he files his return next year.

Yes. In effect, your son sold his property, but then permitted the
buyer to withdraw from the contract in return for a $15,000 fee. That
is income and should be reported. I would suggest it might be
classified as "other income" and reported on line 21 of Form 1040. (I'm
assuming he isn't in the real estate business.)

Depending on your son's total income, he should either increase his
withholding or arrange to make estimated tax payments to offset the
additional tax he will owe for 2008. Under the circumstances, it might
be worth his while to seek guidance from a tax advisor.

Bill

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Taxlover on March 22, 2008, 12:05 am
Please log in for more thread options

> Yes. In effect, your son sold his property, but then permitted the
> buyer to withdraw from the contract in return for a $15,000 fee. That
> is income and should be reported. I would suggest it might be
> classified as "other income" and reported on line 21 of Form 1040.

Couldn't it be thrown in with what he eventually sells his house for, paying
capital gains on it as appropriate?

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Bill on March 22, 2008, 10:58 am
Please log in for more thread options

taxlover@yahoo.com (Taxlover) posted:

>>Yes. In effect, your son sold his property, but
>>then permitted the buyer to withdraw from
>>the contract in return for a $15,000 fee. That
>>is income and should be reported. I would
>>suggest it might be classified as "other
>>income" and reported on line 21 of Form
>>1040.

>Couldn't it be thrown in with what he
>eventually sells his house for, paying capital
>gains on it as appropriate?

Yes it possibly could, in the event that occurs within the same tax
year. Frankly, I was reflecting the dire real estate market conditions
-- which undoubtedly led to the original cancellation event -- and
assumed there was enough doubt about a replacement buyer to plan for
handling the status quo situation.

Bill

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Harlan Lunsford on March 22, 2008, 5:19 pm
Please log in for more thread options
Bill wrote:
> taxlover@yahoo.com (Taxlover) posted:
>
>>> Yes. In effect, your son sold his property, but
>>> then permitted the buyer to withdraw from
>>> the contract in return for a $15,000 fee. That
>>> is income and should be reported. I would
>>> suggest it might be classified as "other
>>> income" and reported on line 21 of Form
>>> 1040.
>
>> Couldn't it be thrown in with what he
>> eventually sells his house for, paying capital
>> gains on it as appropriate?
>
> Yes it possibly could, in the event that occurs within the same tax
> year. Frankly, I was reflecting the dire real estate market conditions
> -- which undoubtedly led to the original cancellation event -- and
> assumed there was enough doubt about a replacement buyer to plan for
> handling the status quo situation.

I'm of a different opinion, Bill, since this was a separate transaction
which will have occurred well before the (eventual) sale of the house.
Doesn't matter that it might be in the same year.

For a client of mine, I would list it as you first said, "other income".

ChEAr$,
Harlan Lunsford, EA n LA

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Similar ThreadsPosted
Can this be claimed as a loss? July 14, 2008, 5:21 pm
Dependents Claimed on Two Returns April 19, 2007, 3:52 am
Unmarried parents both claimed child March 21, 2007, 2:06 pm
State tax drops when dependents not claimed. How/why? February 4, 2008, 4:30 pm
Economic Stimulus Eligibility for individuals claimed as dependent June 4, 2008, 3:45 pm
Can a couple married on December 30th file married joint if one is being claimed as a dependent February 27, 2007, 3:36 pm
Should two states income on W2 sum to Federal Gross Income ? April 9, 2008, 2:23 pm
Income Tax on Social Security Income September 10, 2007, 6:58 pm
Re: Income Tax on Social Security Income September 12, 2007, 10:05 pm
Schedule C Earned Income - Excluded as Foreign Earned Income? May 31, 2007, 12:58 am

Contact Us | Privacy Policy
This site is not affiliated with Intuit - makers of Quickbooks and Quicken software
This site is not affiliated with Sage Software - makers of Peachtree accounting software
XML SitemapXML Sitemap