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Mark D
Mark D, Enrolled Agent
Category: Tax
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Experience:  MBA, EA, Specializing in Business and Individual Tax Returns and Issues
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IN THE U.S., IF I RECEIVE MONEY TO GIVE AN OPTION FOR SOMEONE

Resolved Question:

IN THE U.S., IF I RECEIVE MONEY TO GIVE AN OPTION FOR SOMEONE TO BUY MY REAL ESTATE, AND THEY PAY ME RENEWALS FOR SEVERAL YEARS AND THEN WALK AWAY FROM THE DEAL, HOW AND WHEN ARE THE PAYMENTS I RECEIVED TAXABLE AND ARE THEY CAPITAL GAINS OR ORDINARY?
Submitted: 4 years ago.
Category: Tax
Expert:  Mark D replied 4 years ago.
Customer

 

Internal Revenue Code 1234 states that options (such as yours) as taxable as ordinary income when either the option expires or it is abandoned, so yours would become taxable in the year of abandonment. You would report this income on line 21 of Form 1040. Please let me know if you have further questions.

 

Regards,

 

Mark D

Mark D, Enrolled Agent
Category: Tax
Satisfied Customers: 989
Experience: MBA, EA, Specializing in Business and Individual Tax Returns and Issues
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