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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22661
Experience:  Taxes, Immigration, Labor Relations
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I made a verbal agreement (with parents) to buy a ski condo:

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I made a verbal agreement (with parents) to buy a ski condo: they were to put it in my name: they did not after we made the deal and I gave them 27K down and remodeled the place at a cost of 113K. Now they are selling it and will give me 140K from the sale: but 1099 me. Can they do that if I am not on documents? The bought the place in 1977 for 45K, second home: owe nothing and selling it for 250K:property in CA
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV : Hi and welcome to Just Answer!
LEV : is that a payment for remodeling services?
Customer:

hi..thanks..just curious about my situation

Customer:

are you waiting for me to do something?

LEV : LEV says:11:35 PMis that a payment for remodeling services?
Customer:

no not really, but it could be...the verbal deal was I was to buy it for 200K I gave them 20K and 1k a month for 7 months (27K) total: they were to put me on the deed: held in joint tenancy: they did not do that: I was paying association fees (400/month x 84 months) and I remodeled: so now mom (dad died) is selling and said she will give me money back, but 1099 me...can she do that

Customer:

we never had a remodeling agreement..it was a purchase..I stopped paying after 7 months, the remodeling becuase they did not want to add me to the deed...

LEV :

The issue is that you do not own the property - so all payments you made related to that property are considered as paid for the original owner - that includes association fees, taxes, utilities, etc.
When the owner pays you back that amount - it should not be reported on 1099 as taxable income.
However - if you provided remodeling services to the owner - the compensation is reported on 1099MISC if the payment was made in the course of business activities.

Customer:

no business activity I remodeled because it was mine..so I thought but...they did not "hire me to remodel."

LEV :

If you had an agreement to purchase the property - and the owner refuses to sell - that is a civil matter between you and the owner - you either negotiate or if negotiation is not possible - either party may sue.

LEV :

Again - if you received compensation for providing remodeling services - that compensation is your taxable income.
However if you received reimbursement for payments you made for the owner - association fees, taxes, utilities, etc - that amount is not taxable and should not be reported to the IRS.

Customer:

I understand that....please look at my question....can I be sent a 1099 for 1. the 27K deposit: 2. The fees I paid 45K 3. The utilities I paid 11K and other expenses such as 55K for the remodel

LEV :

So far - based on your information - you received $140k.
Part of that amount is a repayment of your original money - 27K down, association fees, etc - that amount is not taxable.
However - the rest is your taxable income - and because it is a compensation for remodeling services - it is your self-employment income.

Customer:

no I paid 140K

Customer:

I have expended...no received

LEV :

Only compensation for remodeling services may be reported as taxable. The part of teh payment which is simply a return of your money should not be reported.

Customer:

remodeling is not my job....I hired it out and paid for it

LEV :

I am not telling that was your job - but you received a compensation for remodeling - correct?

Customer:

NO

Customer:

I paid for it

Customer:

they are going to pay me exacty what I paid to have the remodel

LEV :

You wrote - "Now they are selling it and will give me 140K from the sale" - is that correct?

LEV :

will you receive $140k?

Customer:

so I paid contractors, suppliers, appliances, furniture etc 55K ..yes that is correct, but why would I pay taxes on 55K when I spent 55K

LEV :

If you will receive $140k - can you identify - which part of that amount is a refund of your own money?

Customer:

all of it is a refund....every bit

LEV :

Refund of your own money that you gave to your parents?

LEV :

You wrote - "I gave them 27K down" - is that correct?

Customer:

no refund of money to parents, fees, utilities and 55/140k for remodel

Customer:

yes...140K breakdown...again..55k remodel...27K down..45k fees 11k utilities

LEV :

Ok - so out of $140k that you will receive:
-- 27k - is a simply refund of your down payment - that is not your income and should not be reported.
-- 45k fees and 11k utilities - that is reimbursement for payments you made for the owner - that is not your income and should not be reported.
-- 55k - if your compensation for remodeling that you made or managed - that is reported as your income - and you may deduct your expenses - materials, subcontractors, etc - that you paid out of that amount - you will be taxable ONLY on net income (if any) - after deducting all your expenses.

Customer:

ok..thanks

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22661
Experience: Taxes, Immigration, Labor Relations
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