Tell me its capital gain

[Ray]

Have a client who attempted to sell a large piece of property ($1,000,000+) but the buyer
backed out and forfeited the $53,000 earnest money.

I guess I should put that $53,000 earnest money as Line 21 'Other Income' but really want to
put it on a Schedule D and get capital gains - he owned the property for years.

Do I have any votes for a capital gains treatment?

Thanks

Ray

[Gene V]

Here's a previous post--

http://www.thetaxbook.com/forums/showthread.php?t=4561&highlight=ernest+money

[Y2KEA]

Assuming the payment is not being reported on any 1099 type form...
Sure, you can put it on schedule D. It is capital gain. STCG that is. IE: ordinary income.

Hmmm, the guy got $53,000 in his pocket for doing nothing & he is crying about taxes. Why feel sorry for somebody who has a tax liability and improperly characterize it?

[Matt Sova]

feel sorry?

Hmmm, the guy got $53,000 in his pocket for doing nothing & he is crying about taxes. Why feel sorry for somebody who has a tax liability and improperly characterize it?

I don't blame the person for asking. Isn't it your job and my job to make sure our clients take advantage of every tax saving loophole we can find? If you have a client that makes 500k/year aren't you going to work just as hard for that client as you would for the guy making 70k?

If this was your client and it was eligible (which it isn't) for capital gain treatment and you knew that would you treat it as ordinary because he got 53k for doing nothing? I doubt it.

Matt

[les grans]

Forfeited deposit is ordinary income. Period.

The forfeited deposit is ordinary income to the guy who kept it. It's not a capital gain, since nothing was sold. I would like very much to hear the arguments on the other side.
I would not like to hear "You won't get caught" as an argument on the other side.