Condo

[JON]

was sold, client thought - the buyer ends up backing out and client is awarded the deposit from escrow. Client did not have any expenses relating to keeping the deposit - real estate agent said it would cost more to enforce and financing looked questionable on buyer's end. He receives $4,850 (received 2017), and still has a condo for sale, he lives in the same complex at his new condo that he had purchased. Is there anyway we could add this to the sales price when it does sale - it was a personal residence for years? or is it taxable as ordinary income - capital gain???

Thanks

[ATSMAN]

was sold, client thought - the buyer ends up backing out and client is awarded the deposit from escrow. Client did not have any expenses relating to keeping the deposit - real estate agent said it would cost more to enforce and financing looked questionable on buyer's end. He receives $4,850 (received 2017), and still has a condo for sale, he lives in the same complex at his new condo that he had purchased. Is there anyway we could add this to the sales price when it does sale - it was a personal residence for years? or is it taxable as ordinary income - capital gain???

Thanks

Normally I would consider the $4850 as CG but in this situation where the same property on which the income was derived is still up for sale, I think you can justify to add that to the final selling price. Was there any 1099 received, because you will have to deal with that issue.

[Burke]

Forfeited escrow deposits are treated as liquidated damages, hence ordinary income to the recipient. No sale or exchange took place, so it cannot be factored into the subsequent sale of the property either as capital gain, or whether the sale of the original property can be treated under 121 exclusion.

[Gene V]

Ordinary Income

I agree with Burke
Here is a article on the subject.

https://www.lexology.com/library/detail.aspx?g=271c4c92-cce7-4a89-895d-ab26d18f8ba2

[JON]

Darn

Thanks, guys