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First and foremost, do not worry - you have not committed tax evasion. Tax evasion occurs when you willfully fail to report income
You have not done that here.
In this case, your income needed to be reported in the year of the sale when funds were received.
You would apply any expenses against that income in the year incurred
You could not wait until the end of the project and then claim all income and expenses in that particular year
I thought it was like a house that you save all your improvement receipts and when you sell the house you claim the receipts against any profit. I am being accused of tax evasion and our accountant has been forbidden to discuss this with us. When the income was converted to a debt, doesn't that remove the income reporting requirement? How can we pay income taxes on amounts we owe?
Thanks for your follow up. First, I would recommend hiring a tax attorney to help you with your situation. It sounds extremely complex, and attorneys are better suited to handling claims of tax evasion
When the sale was complete, that's when the reporting requirement became applicable
The sales were never completed, then the income was converted to debts. How can you pay income taxes on a debt?
If this is the case, then you show documentation of that to your tax attorney and they will be able to amend your returns to properly reflect the situation
Thank you for your efforts. I'll contact a tax attorney.
But I will say that the title never passing through would mean that there could not be a sale
And when you say the project 'failed' - could you elaborate more on that?
What's going on with the notes that you signed for the other two lots?
More details are needed for a comprehensive answer.
If you can provide more details, then we can revisit and possibly get you some resolution to this matter
We ran out of money in 2009 and could not finish to sell the other lots. We were sued for breach of contract so we filed for bankruptcy to protect our personal residence. The debts were discharged in bankruptcy, but we lost our home as well.
Okay then you really don't have income here. You never really closed on the lots, and when it comes to the debt when it's canceled by bankruptcy there's no income
You may have a loss on the disposal of the asset. You're not sitting as bad as you think.
Is there anything else that I can help you with today?
That was great and I appreciate your help. Thank you.
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