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Posted by D. Stussy on June 10, 2006, 4:19 pm
Please log in for more thread options A.G. Kalman wrote:
> D. Stussy wrote:
>> LLTS wrote:
>>> Taxpayer put 10,000 down on a rental property. Financing
>>> fell through and he eventually lost his deposit. Misc
>>> subject to 2% on Sch A?? Anyone have any ideas?
>> Not deductible at all. Had the transaction gone through, it
>> would have been a capitalized amount. As no asset was
>> actually acquired, there will be no deduction upon
>> disposition either (nothing to dispose).
> Why isn't this an expense incurred to produce income that
> must be included in gross income? Sounds like a Line 22
> Schedule A deduction to me. It was rental property not a
> personal residence.
If you feel that you can make that argument (and deduct it
pursuant to Section 212 - production of income), go ahead.
However, I note that this was an amount expended for the
acquisiton of an asset (that was not actually required), and
that requires capitalization - but as there's nothing to
capitalize the expenditure into, there's no provision under
which it would be deductible.
As for Schedule A, line 22, I must disagree. As the
original question claims a connection to rental property AND
as capital asset transactions (sales) both are "above the
line" type transactions, Schedule A is the wrong place for
it. An aggressive approach would place it onto Schedule E,
but I bet that Schedule D (with the $3k capital loss limit)
would be considered by the IRS upon audit if outright
disallowance isn't taken as their position.
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