Last year, I was going to buy a second house as a rental home and paid $20,000 as honest money. But I changed my mind not to buy that house so that I lost all honest money. Can I deduct this as capital loss or else?
2007-02-14 14:54:27 · 4 answers · asked by mounties 1 in Business & Finance ➔ Taxes ➔ United States
Last year, I was going to buy a second house as a rental house and paid $20,000 as earnest money. But I changed my mind not to buy that house so that I lost all earnest money. Can I deduct this as capital loss or else?
2007-02-14 18:32:18 · update #1
this is a Sec. 165(c)(2) loss (loss on transaction entered into for a profit). The more difficult question is where this loss is deducted on the return. If you are taking the position that this is a deduction "attributable to property held for the production of rents or royalties", then the loss would be deductible on Schedule D as a short-term capital loss; otherwise, the loss would be deductible as an itemized deduction subject to 2% on Schedule A
2007-02-14 15:28:18 · answer #1 · answered by tma 6 · 0⤊ 4⤋
You mean earnest money, right?
No, sorry, that is not deductible.
2007-02-14 15:11:41 · answer #2 · answered by Bostonian In MO 7 · 1⤊ 0⤋
No, a forfeited deposit isn't deductible. Since you paid it out voluntarily, it can't be considered a bad debt.
2007-02-14 15:20:23 · answer #3 · answered by Judy 7 · 2⤊ 1⤋
Honest--no.
It's earnest money.
20K earnest and backout?
2007-02-14 15:41:33 · answer #4 · answered by cork 7 · 0⤊ 1⤋