Does anyone know how earnest money received out of breach of contract is reported on the seller's income tax? If I was selling a property and the buyer posts (non-refundable) earnest money of $100,000 and backs out how would I report the money received on my taxes? Please site references
2007-07-27 11:09:58 · 6 answers · asked by mr.knowitall 1 in Business & Finance ➔ Taxes ➔ United States
It's taxed as ordinary income. It goes on the Other Income line on your return.
Unless specifically excluded by law from taxation, ALL monies or goods of value that you receive are subject to taxation.
Since liquidated damages on a broken contract are not specifically excluded from income tax they are taxable. Since they are not characterized as a type of income subject to lower tax rates, such as long term capital gains, they're taxed as ordinary income.
IRS Pub 525 -- Taxable and Non-Taxable Income.
2007-07-27 11:30:30 · answer #1 · answered by Bostonian In MO 7 · 3⤊ 1⤋
probable no longer. in the event that they agreed to do the flaws you asked then there isn't any reason you need to back out. somewhat in the event that they have already went forward and employed contractors or started out solving the flaws and paid for the components. Why are you retreating? bypass to the valuables back and seem at it with sparkling eyes or carry a chum who's conscious a touch approximately residences who does not artwork for a realtor corporation or who does not inspect residences. pay attention what they ought to declare approximately it. it ought to be somebody you artwork with who's offered a pair of residences of their years. Ask them to return and supply their opinion. they had probable be flattered. you're able to be able to nicely be getting scared because of the fact paying for a house is a huge deal. yet beforehand dropping a grand of you cash, make certain you extremely do no longer choose this abode. yet nonetheless, a grand isn't nicely worth paying for a house you extremely; do unlike and is merely no longer chuffed in.
2016-12-11 03:44:14 · answer #2 · answered by ? 4 · 0⤊ 0⤋
It would be shown as "other income" on the tax form, and would be taxed as ordinary income.
2007-07-27 12:33:28 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
If you will continue sailing the house, you can add this $100000.00 to sale price and claim income and expenses the same year when you sell the house. If you don't wont to sell the house any more, than you will have to show this as your income, yes. Good Luck with your transaction.
2007-07-27 11:29:49 · answer #4 · answered by reality 6 · 0⤊ 3⤋
I think you should do your own homework, but I'd say as miscellaneous income.
2007-07-27 11:13:30 · answer #5 · answered by Anonymous · 1⤊ 2⤋
I think it depends
2016-08-24 10:05:43 · answer #6 · answered by Anonymous · 0⤊ 0⤋