Relocation payments included in W-2 ... loss on sale of home

[LCP]

Taxpayer received a relocation payment which was grossed up and included in his W-2 as taxable income.

Among the listing is $19,600 for "Owner Direct Home Sale - Loss on Sale". I'm having a hard time with it being taxable income since it wouldn't have been if he had received that much more from a buyer. Then again he did receive a benefit that he wouldn't otherwise have received...... but he wouldn't have sold his home either except for the relocation.

Any help?

[JohnH]

Well, you could fill up pages with "what if's". But the fact is, he sold his home so a transaction took place. He sold at a substantial loss and his employer made him whole on the loss. It is taxable income, and he is blessed to be working for someone who has such a policy. If I'd had someone who would do that for me the last time I sold something at a loss, I'd gladly pay the tax on the make-up payment. And if I read this correctly, the employer also grossed up for the taxes due on the reimbursed loss as well.

[FEDUKE404]

If the queen had . . .

Taxpayer received a relocation payment which was grossed up and included in his W-2 as taxable income.

Among the listing is $19,600 for "Owner Direct Home Sale - Loss on Sale". I'm having a hard time with it being taxable income since it wouldn't have been if he had received that much more from a buyer. Then again he did receive a benefit that he wouldn't otherwise have received...... but he wouldn't have sold his home either except for the relocation.

Any help?

Well, the buyer did not pay the $19,600 . . .

Agree with JohnH. This client should be happy his employer thinks enough of him to make the move less painful. The reimbursement is clearly taxable income. End of that story!

FE

[JohnH]

In thinking about this a little more, and reflecting upon the only times I have seen this done, I'm betting the client fully understands what is going on. The company has him on a promotion fast-track, and the move to greater responsibilities is MUCH more important than whether he makes or loses money on a piddly thing like a home. In most situations, turning down the transfer for any reason is a serious Career-Limiting-Move, even more so when the company offers to make him whole on any loss on the sale of the home. So maybe the tax preparer is struggling to get a handle on it, but the client has no problem with the transaction. To him, it is just a stepping stone to bigger and better positions in upper management.

[LCP]

Thanks folks.... I was afraid of that. At the same time I don't subscribe to the concept that Uncle Sam deserves a cut of all good fortune so I figured I'd ask.

Here's another issue........ the employee received allowances based on a percentage of his salary. The relocation people paid the cost of moving the household items directly and won't give him the figure for the actual cost. Is he not able to deduct that figure and pay tax only on the excess?

[BP.]

The relocation people paid the cost of moving the household items directly . . . Is he not able to deduct that figure?

Were the moving costs included in taxable compensation on his W-2?
Can a final paystub or relocation report help reconcile what went into figuring Box 1 compensation?
If compensation, it is a deductible moving expense.