taxable income

[Bettie Cheek]

client let a company use his land for right of way without charge. they gave him an amount to repair the land they damagedwhen they drove on it. Would he include this in income?

[ChEAr$]

But of course.

client let a company use his land for right of way without charge. they gave him an amount to repair the land they damagedwhen they drove on it. Would he include this in income?

It's income, however less any amounts actually spent to "repair" the land.

[jainen]

reduces basis

>>less any amounts actually spent to "repair" the land<<

How would you report that, Harlan? It isn't a casualty loss because it wasn't sudden and unexpected. Repairs on non-business property aren't otherwise deductible.

I would call it a de facto payment for the easement -- non taxable, but reduces basis.

[OldJack]

It's income, however less any amounts actually spent to "repair" the land.

I would call it reimbursement of expense to extent of actual repairs. Income for any excess.

edit: This based upon the fact that there is no easement to reduce basis.

[George Boutwell]

Sounds like rent to me.

If you figure out a way to make use of property nontaxable by calling it "right of way," I have a lot of landlord clients I need to tell about it.

[OldJack]

Sounds like rent to me.

If you figure out a way to make use of property nontaxable by calling it "right of way," I have a lot of landlord clients I need to tell about it.

If you gave me an amount to repair my car after you used it free and damaged it would you call that rent?

[George Boutwell]

If you gave me an amount to repair my car after you used it free and damaged it would you call that rent?

If I gave you a security deposit to make sure I didn't damage your house while I lived in it, and you didn't give it back to me because I left the place a mess, would you call that income?

[geekgirldany]

It doesn't sound like they bought property from him or was an easement either. The property was used and then the taxpayer was paid to return it back to the state it was before the use. I would put it down as rent and the deduct the expense for the repair.

[jainen]

anything you like

>>Would he include this in income?<<

Do you see anything you like, Bettie? Misc. income, reduction in basis, rent, payment in settlement of damages, reimbursement of personal expense, forfeit of security deposit... nobody called it self-employment yet, but we could probably come up with something along that line if you need it!

[George Boutwell]

nobody called it self-employment yet, but we could probably come up with something along that line if you need it!

No one called it nonbusiness property except you, in an earlier post

>>Repairs on non-business property aren't otherwise deductible.<<

The great thing about questions whose answers rely on the facts, where few facts are given, is that we can make them up as we go along.

What I see happening here is that the taxpayer owns some construction and roadbuilding equipment, that he keeps at a commercial yard because his homeowners association won't allow them to be parked in front of his condo.

The county needed to use the land for a few months while building a road, and their equipment tore it up. They figured that it would cost $10,000 to hire someone with a bulldozer to put it back the way it was, so they paid that much to the taxpayer, who files Schedule C to report income that includes what he earns from using his bulldozer.

Of course he did the work himself. So of course, it's not taxable and not self-employment income. Or is it?

***
(By the way, Jainen, the answer to the "presidential appointee" question you and others are kicking around over on the Gray-Haired Granny message board is Section 1043. I think we should have a contest to guess how long it will take them to discover it. What I find interesting is that someone who is being considered for such an appointment, isn't being provided necessary information by the prospective employer. Maybe they have their hands full of other problems?)

[OldJack]

If I gave you a security deposit to make sure I didn't damage your house while I lived in it, and you didn't give it back to me because I left the place a mess, would you call that income?

Of course it would be income with actual repairs as expense. The difference in your example is that there is an IRS reg covering your situation. Also, the original "rent deposit" was based on monthly rent income, not designated as for reimbursement or repairs. You can give us a better example that is comparable.

[George Boutwell]

The difference in your example is that there is an IRS reg covering your situation. Also, the original "rent deposit" was based on monthly rent income, not designated as for reimbursement or repairs.

IRS doesn't have regs. Treasury has Regulations. Congress enacts laws. The law says that all income is taxable from whatever source derived, unless specifically excluded.

How do you know the damage deposit is based on monthly rent? I didn't say that.

[OldJack]

Whatever makes you happy George.

[erchess]

Renal customs vary

from place to place. In NC it is customary to charge two sums: first and last month's rent, which the tenant will never see again, and a deposit which theoretically will be returned if the tenant does a good enough job of cleaning the place up before turning in the key.

The first month's rent immediately belongs to the landlord. The last month's rent becomes the Landlord's property on the due date for the relevant month. The deposit becomes the Landlord's property after the tenant is gone and the landlord determines that the condition of the property warrants non return. Monies that do not yet belong to the Landlord must be kept in a non interest bearing account.

North Carolina leaves it up to the marketplace to decide how much the rent and the deposit are. For most properties the first/last rent is x and the deposit varies from x to about 5x depending on the presence of children or pets and the credit worthiness off the tenants. Slum properties tend to have little or no deposit because the landlords are accustomed to major damage being done by the tenants and build this into the rent.