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Non-Refundable deposit for RE Sale

February 13, 2017 • Anonymous • Log In to Post Comments

When is a non-refundable deposit from the sale of real estate(commercial real estate) taxable.

If payment is received more than a year before the property is sold. 

Is it taxable in year of sale or when received and is it ordinary income or capital gain is sale does not go through?

If the sale goes through It is just part of payment or is this an installment sale - even though the property is not sold yet - a year and half later?

Thanks.

 


Comments

This is a very complex area and depends on state law and the contract but I belive the option is taxable when it lapses or when the purchaser advises the seller that he/she won't exercise the option. See IRC Sec. 1234

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