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Taxpayer purchased an equity membership in a country club.

Customer Question
$12,500-May 1986. Plus assesment...
Taxpayer purchased an equity membership in a country club. $12,500-May 1986. Plus assesment of $5,000 in the form of an interest free loan to the CC 1997.   Through the years memberships commonly sold at $25,000 and were rumored to be worth as much as $100,000 due to land value and water rights.    The combination of the poor economy and the deterioration of the golf course caused a new assesment and the course closed for renovation. Members stopped paying dues 71/600 and memberships traded at $0.   Taxpayer offered an incentive of $1,100 to procure a sale. The equity membership was sold for $0 plus $1,100. The Country Club charged a transfer fee of $5,000 in the form of the seller's forgivness of the interest free loan from 1997.     Tax Result?   Long term loss $12,500, $1,100 sales expense, $5,000 fee expense.... Please comment
Submitted: 8 years ago.Category: Tax
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4/1/2009
Tax Professional: Robin D., Senior Tax Advisor 4 replied 8 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 16,263
Experience: 15years with H & R Block. Divisional leader, Instructor
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HelloCustomer

Bear with me please as I continue to research for IRS ruling of loss allowed on this type of property.

Since you generally can not claim a deduction on your dues to such an organization I want a definite ruling on allowable loss on the sale.

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Customer reply replied 8 years ago

It was an equity membership...Subject to market conditions. I understand that dues

are not deductible, but dues are not my question. Sale of an asset at a loss + sales

expense + transfer fee expense.

Tax Professional: Robin D., Senior Tax Advisor 4 replied 8 years ago

Hello again,

Yes, I understand that, I just wanted to make sure that what I am about to advise is an interpretation that will not be misleading down the road.

Your transfer fee expense would be included in the equation if it was a normal and usual fee for all acquisitions of this nature from the club. In other words as long as everyone had to pay the same then yes you can use it against the sell.

Sells expense was not something that I was looking into, the expenses of taxable sales are generally and usually used at time of sale and includeable.

 

I appologize for making you wait and since you already paid I am going to mark this as information needed so you do not pay again.

 

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Customer reply replied 8 years ago

So I have it correct 12500 LT loss, 1100 sales expense, 5000 transfer fee expense.

All sales are subject to a 5000 transfer fee. Thankyou

Tax Professional: Robin D., Senior Tax Advisor 4 replied 8 years ago

Hello,

Yes, would handle it that way.

Thank you

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Robin D.
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