I have a client whose management company collected rents from the tenant, proceeded to evict the tenant, and did not turn the collected funds over to my client. Tenants have provided documentation of rent payments for the entire year. How do I handle the stolen monies?
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Because the management company was collecting rent on behalf of the landlord as their agent, in legal terms they may have had constructive receipt of the rent so it must go on Sch E as rent! Then they can do a business casualty/theft loss for 2017. If this had happened in 2018 I think they would be SOL!
Again I am not a lawyer, so this is my opinion!Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR -
IMO, rents not received are not shown as income. But your client may have a basis for a lawsuit or judgment against the mgmt company in order to recover the funds.Comment
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1. Your client should file a police report.
2. Normally for my client that uses this type of service, he receives his share of the rent, after the collection/management fee, every month. Your client didn't? If he normally did, and didn't for all of 2017, why wasn't this stopped before?Jiggers, EAComment
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Jiggers is correct. This is embezzlement and a police report should be attached to the return however, the loss should not be reported until the TP knows he will not be getting the money. The police report should trigger charges being filed. Once the court action is done you will know whether restitution was ordered.Believe nothing you have not personally researched and verified.Comment
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