Option Money On LO And Other Confusing Stuff
got a tenant to sign a 2yr LO on a new construction. LO agreement is seperate from
rental contract.
i got 3k non-refundable option money from the tenant. is this taxable this year?
also the lender refused to have the builder pay for more than 2% of closing costs, so the mrtg broker is reimbursing me the extra 1% closing costs after closing. do i need to report this or just adjust my basis?
also the builder is kicking in a 1k bonus for closing before end of year, also after closing.
this seems like regular income, right??
and i'd never thought i'd see this, but the builder let the tenant move in 5 days before closing and didnt charge me rent. (apparently he knew the mrtg broker well) so i'm getting an extra week's rent for a property and the mortgage isnt due for a whole month. mmmm... negative vacancy :-D
Option consideration received is not taxable income until the option is exercised or expires.
Builder and real estate broker contributions to your closing costs and an early closing rebate are adjustments to your basis.
i have a similar situation.
every month the tenant will pay me $75 towards option consideration for the first 20months as he
was short $1500 on option money. only in this case
the $75 is considered as downpayment as it the intial $4k i got. is this considered downpayment or option money. are the tax consequences the same in either case?
The answer is nearly the same whether discussing down payment or option consideration.
The downpayment in not taxable income until forfeited. The option consideration is not taxable income until the option is exercised or it expires.