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Subject Author Date
Rebate of real estate commission to buyer. Is it taxable or not? Jim Sokoloff 06-12-2007
Posted by Jim Sokoloff on June 12, 2007, 1:07 am
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 My situation: I just bought a house, and had arranged with
my buyer's agent that I would recieve a rebate of <some
percentage> of the selling price of the house, to be paid
from the commission they received from the seller's agent
(who gets it from the seller, who gets it from me).

The question is: is this rebate taxable income to me? I
expect that I will receive a 1099 from my buyer's agency,
but that in and of itself does not settle the matter of
taxability, at least not to me.

If it matters at all for state tax issues, state is
Massachusetts.

Thanks for any advice!
---Jim

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Posted by GSalisbury on June 18, 2007, 9:27 am
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> My situation: I just bought a house, and had arranged with
> my buyer's agent that I would recieve a rebate of <some
> percentage> of the selling price of the house, to be paid
> from the commission they received from the seller's agent
> (who gets it from the seller, who gets it from me).
>
> The question is: is this rebate taxable income to me? I
> expect that I will receive a 1099 from my buyer's agency,
> but that in and of itself does not settle the matter of
> taxability, at least not to me.
>
> If it matters at all for state tax issues, state is
> Massachusetts.

I'm not a tax guy but I don't see how it could be taxable
income. It's not income at all (you had it to begin with it
- didn't newly come your way). You simply got some of your
money back - it reduced your cost. You paid ten dollars for
something and got two back so your net cost was eight and
the two is back where it came from - your pocket. Maybe it's
an interest free loan but that seems a stretch. Seems like
it should be no different than buying a thingy-bob at
Staples and getting a two dollar rebate check some time down
the road. But then again I'm not a tax dude.

Geo.

<< ------------------------------------------------------- >>
<< 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 (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Arthur Kamlet on June 18, 2007, 9:28 am
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> My situation: I just bought a house, and had arranged with
> my buyer's agent that I would recieve a rebate of <some
> percentage> of the selling price of the house, to be paid
> from the commission they received from the seller's agent
> (who gets it from the seller, who gets it from me).
>
> The question is: is this rebate taxable income to me? I
> expect that I will receive a 1099 from my buyer's agency,
> but that in and of itself does not settle the matter of
> taxability, at least not to me.
>
> If it matters at all for state tax issues, state is
> Massachusetts.

First I assume this is all disclosed on the closing
setlement statement? If not, it could be fraudulent
and I would seek legal advice.

If disclosed then it reduces the cost basis of your
property, but is not taxable income.

--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- >>
<< 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 (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by PaulTry on June 19, 2007, 9:30 pm
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Arthur Kamlet wrote:

>> My situation: I just bought a house, and had arranged with
>> my buyer's agent that I would recieve a rebate of <some
>> percentage> of the selling price of the house, to be paid
>> from the commission they received from the seller's agent
>> (who gets it from the seller, who gets it from me).
>>
>> The question is: is this rebate taxable income to me? I
>> expect that I will receive a 1099 from my buyer's agency,
>> but that in and of itself does not settle the matter of
>> taxability, at least not to me.
>>
>> If it matters at all for state tax issues, state is
>> Massachusetts.

> First I assume this is all disclosed on the closing
> setlement statement? If not, it could be fraudulent
> and I would seek legal advice.
>
> If disclosed then it reduces the cost basis of your
> property, but is not taxable income.

See: http://www.rebatereps.com/faq/index.php

According to Fannie Mae guidelines and federal laws, all
credits must be given on the settlement statement (not after
closing). Failure to disclose the payment to the buyer on
the settlement statement can constitute a "false statement
to a lender" (a federal crime), and also a violation of the
License Law and Commission rules. You can read what a
state real estate commission wrote about this federal
statute. As long as the rebate is listed on the HUD-1, it is
perfectly fine in the majority of states, and most lenders
do allow the rebate on the HUD-1. However, if your lender
will not allow the rebate on the HUD-1, then the only way
for you to get the credit would be to have the seller lower
the sales price by the amount of the rebate. It is the
buyer's responsibility to ensure they have selected a lender
who will allow the rebate on the HUD-1 statement.

<< ------------------------------------------------------- >>
<< 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 (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Arthur Kamlet on June 24, 2007, 10:42 pm
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> Arthur Kamlet wrote:

>>> My situation: I just bought a house, and had arranged with
>>> my buyer's agent that I would recieve a rebate of <some
>>> percentage> of the selling price of the house, to be paid
>>> from the commission they received from the seller's agent
>>> (who gets it from the seller, who gets it from me).
>>>
>>> The question is: is this rebate taxable income to me? I
>>> expect that I will receive a 1099 from my buyer's agency,
>>> but that in and of itself does not settle the matter of
>>> taxability, at least not to me.
>>>
>>> If it matters at all for state tax issues, state is
>>> Massachusetts.

>> First I assume this is all disclosed on the closing
>> setlement statement? If not, it could be fraudulent
>> and I would seek legal advice.
>>
>> If disclosed then it reduces the cost basis of your
>> property, but is not taxable income.

> See: http://www.rebatereps.com/faq/index.php
>
> According to Fannie Mae guidelines and federal laws, all
> credits must be given on the settlement statement (not after
> closing). Failure to disclose the payment to the buyer on
> the settlement statement can constitute a "false statement
> to a lender" (a federal crime), and also a violation of the
> License Law and Commission rules. You can read what a
> state real estate commission wrote about this federal
> statute. As long as the rebate is listed on the HUD-1, it is
> perfectly fine in the majority of states, and most lenders
> do allow the rebate on the HUD-1. However, if your lender
> will not allow the rebate on the HUD-1, then the only way
> for you to get the credit would be to have the seller lower
> the sales price by the amount of the rebate. It is the
> buyer's responsibility to ensure they have selected a lender
> who will allow the rebate on the HUD-1 statement.

Yup. What I said.

--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- >>
<< 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 (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

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