Real Estate Loss

[Brian EA]

Client invested $12000 to purchase residential home within a specific time limit, hoping that his current home would sell. His current home did not sell and he lost the deposit.

Any suggestions how this transaction should be reported.

thanks
brian

[HBurkholder]

Sounds like an educational expense (just kidding) I don't know how he can get a deduction for this. He made a sad mistake to enter into a purchase agreement without a house sale contingency or be in a position to get a bridge loan. Either his RE agent did not adequately protect his position or he instructed the agent to make this foolish move.

[Brian EA]

Brad, where can i find any info in the taxbook on this thread.

thanks
brian

[Brad Imsdahl]

TTB, page 6-19 has information on figuring the adjusted basis of a residence. I do not see any discussion on what to do when a taxpayer forfeits a security deposit on the potential purchase of a new home.

[Brian EA]

TTB, page 6-19 has information on figuring the adjusted basis of a residence. I do not see any discussion on what to do when a taxpayer forfeits a security deposit on the potential purchase of a new home.

To the experts out there. Can this taxpayer claim a loss on this investment or is it a complete loss?

I NEED HELP

thanks
brian

[Dervis]

Loss

If he were buying rental property, he could claim a loss, but if it were for his own residence, this is a personal loss and not deductible. Because the sale was dependent on selling his current personal residence, I don't see how you could argue that it is not a personal loss, and therefore it's not deductible.

[jerome]

Its not a casualty loss.

Its not a bad debt.

Its not an investment loss as it is for a personal residence.

Its a non-deductible personal loss.

[jainen]

it is not illegal

>>Its not... Its not... Its not... <<

What it is is another example of why a buyer should get his OWN agent, instead of trying to use the seller's agent.

He should file a claim for breach of fiduciary duty against the agent who wrote his offer without a contingency on selling his former home. Obviously the contract was slanted to benefit the seller. $12000 may be small enough that insurance will pay off without much fight.

The conflict of interest is so blatant that I never understood why it is not illegal.

[Brian EA]

Thanks guys. Very much appreciated

brian