Pacun Posted February 27 Report Posted February 27 Client got 1099-misc for 30K. She was given that money to move out because the building was repurposed. Taxable or rent refund? If taxable = other income. If rent refund, how to report 1099-misc? Quote
Patrick Michael Posted February 27 Report Posted February 27 All income is taxable unless specifically exempted by law. I would put it on Sch 1, no SE tax. 5 Quote
Max W Posted February 28 Report Posted February 28 It may not be taxable by the state. One example is CA. Quote
schirallicpa Posted February 28 Report Posted February 28 Had she already paid ahead that it would be a refund? 2 Quote
Pacun Posted March 3 Author Report Posted March 3 On 2/28/2025 at 3:59 PM, schirallicpa said: Had she already paid ahead that it would be a refund? No. Let's call it a rent dividend which is only given to the people that paid rent in the past. I wish I can call it rent dividend and make it NOT taxable. I never listen to clients when they tell me that the IRS told them it was not taxable... but this client had conversation with the IRS and she claims the agent told her that the money she received was not taxable.... I wonder if it is because moving out is a pain. So the payment could be for pain and suffering and therefore not taxable. I also thought that it could be a rent refund... rent dividend, etc. Quote
jklcpa Posted March 3 Report Posted March 3 Taxable. You can't rely on anything an IRS representative answering the phone tells a taxpayer, and especially if you were not privy to the conversation and know exactly what your client told the person or asked. 4 Quote
Lion EA Posted March 3 Report Posted March 3 I agree that the IRS staff answers incorrectly more often than correctly. The only thing I found on IRS.gov is from 2011: The money received is taxable and should be reported on Form 1040, line 21 as “other income.” https://www.irs.gov/pub/irs-utl/VTA_2011-08_Cash_for_Keys_Program.pdf I remember some changes during Covid. I don't remember specifics or whether any changes continued after Covid. Please post when you find a current answer. 2 Quote
michaelmars Posted March 16 Report Posted March 16 Late to answer but if they bought out her lease then its a capital transaction. Research lease buyouts, its been a while since I had one. I can't recall if we were able to report the balance of the lease as basis. Last one was about 5 years ago. 1 Quote
DANRVAN Posted March 17 Report Posted March 17 7 hours ago, michaelmars said: bought out her lease then its a capital transaction Right, the lease is considered an interest in real property and considered a capital asset under section 1221. On 3/3/2025 at 8:33 AM, Pacun said: .. I wonder if it is because moving out is a pain. So the payment could be for pain and suffering and therefore not taxable. No way, see PLR 8952030 for a taxpayer that tried to go that route! "Cash for Keys" is clearly an exchange of a capital asset for a renter per George and Myrsini Stotis v. Commissioner ; as well as for a homeowner subject to a deed in lieu of foreclosure agreement per Bobo v. Comm'r, T.C. Summary Opinion 2016-74 Quote
DANRVAN Posted March 17 Report Posted March 17 On 2/27/2025 at 4:23 AM, Patrick Michael said: All income is taxable unless specifically exempted by law. I would put it on Sch 1, no SE tax. It is a capital transaction. Quote
DANRVAN Posted March 17 Report Posted March 17 On 2/28/2025 at 12:46 PM, Max W said: It may not be taxable by the state. One example is CA. That surprises me. It is taxable in Oregon for sure. 1 Quote
Lee B Posted March 17 Report Posted March 17 10 hours ago, DANRVAN said: It is a capital transaction. It there were leasehold improvements involved, I agree, but in the case of a rental is it a capital transaction? Quote
DANRVAN Posted March 17 Report Posted March 17 17 minutes ago, Lee B said: in the case of a rental is it a capital transaction? "Petitioner's leasehold interest in rooms 103 and 141 was a capital asset" George and Myrsini Stotis v. Commissioner Quote
DANRVAN Posted March 17 Report Posted March 17 1 hour ago, Lee B said: So a rental is a "leasehold interest"? Good point. In reviewing George and Myrsini Stotis v. Commissioner, the case did not specify that there was a lease vs rent, but maybe that was implied. My first impression was that there was nothing more than a rental agreement The case also referred to Commissioner v. McCue Bros. & Drummond where lease had expired but an interest was held by New York emergency rent control laws resulting; in a capital gain. 11 hours ago, DANRVAN said: "Cash for Keys" is clearly an exchange of a capital asset for a renter per George and Myrsini Stotis v. Commissioner I am restating this to say "depends on facts and circumstances", do your research. 1 Quote
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