Real Estate Commision Offset

[Sabre]

One of my clients is participating in a purchase as the buyer. He has his real state license. In order to meet the 25% down they have struct a deal to increase the sales price but give him the increase back as a commission which he will turn around and give to the bank.

He asked me how this would be treated and i told him the commission would be ordinary income to him eventhough he put the commission back into the property. Obviously he just wanted to reduce the cost of the property on his books by the commission he put back into the downpayment and not recognize the ordinary income of the commission.

Any creative ideas out there?

[BOB W]

One of my clients is participating in a purchase as the buyer. He has his real state license. In order to meet the 25% down they have struct a deal to increase the sales price but give him the increase back as a commission which he will turn around and give to the bank.

He asked me how this would be treated and i told him the commission would be ordinary income to him eventhough he put the commission back into the property. Obviously he just wanted to reduce the cost of the property on his books by the commission he put back into the downpayment and not recognize the ordinary income of the commission.

Any creative ideas out there?

Ahaa... the webs people weave.. ordinary income for the commission. He should happy he got his 25% down and move on. He now has a higher cost basis, which he wanted.

[Davc]

Ahaa... the webs people weave.. ordinary income for the commission. He should happy he got his 25% down and move on. He now has a higher cost basis, which he wanted.

I think what he wants is to defraud the lender.

[Mo Sheets]

Striped Suit

Tell your client you don't think he/she will look good in a state-issued striped suit. Those horizontal stripes are not figure-flattering! What he or she is proposing is definately illegal.

Mo

[JON]

If they

wanted to reduce the the purchase to get him to 25% they could have done it through closing costs (commissions), the seller etc= They picked the commission and knew what they were doing.

[taxxcpa]

It may work

Although he is pulling a fast one in fabricating a larger down-payment, he may get by with it if the mortgage company does not catch it.

He might somehow conceal the "commission" and omit that income too. Again, he is risking getting caught.

Illegal schemes sometimes work, but they are still illegal.