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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55608
Experience:  29 years of experience as a tax, real estate, and business attorney.
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Need someone that knows how to enter HUD-1 forms for Real Estate

Customer Question

<p>Need someone that knows how to enter HUD-1 forms for Real Estate Tax Returns.</p><p>In looking at a HUD Entry video: it seems that all one time expenses from the HUD should be classed against Buildings and Improvements. What about expenses incured prior to the closing, such as a property inspection? These are not on the HUD, but should they also be classed to the Building? If so, what do I class them to originally (prior to the closing) - I can't class them against Buildings and Improvements which is a Fixed Asset since I don't own the property yet and the deal may not progress. </p><p>Also, as a second, simpler question... If a tennant breaks the house and then gives me a $200 check to cover it, how would I enter that in quickbooks? The $200 would be deposited to my bank, but what would it be offset against? Would it be the Buildings and Improvements account? My thought process is that this is a 'negative' improvement.</p>
Submitted: 6 years ago.
Category: Tax
Expert:  Richard replied 6 years ago.

Good afternoon...Ok...the inspection cost is does not get added to basis. As to the deposit forfeited...The $200 cash is treated as income, and then you offset it by forfeited deposit.



I hope this has given you the guidance you were seeking. I wish you the best of luck!


If you have a follow-up question, please remember that there might be a delay between your follow up questions and my answers because I may be helping other clients or taking a break.


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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 6 years ago.

Ok, not what I expected on both accounts.


Q1) I had a mortgage broker who took 1/2 payment before and 1/2 at the closing, are you saying that the payment beforehand is expensed and the one at the closing is added to the basis? Doesn't seem to make sense. There was also a bank mortgage application fee of $2,000 that was refunded at the closing. By your answer I would expense the fee when I paid it, but the refund would decrease the basis? Or are you saying I'm wrong about the one-time fees at the closing being applied to the basis?


Q2) This answer does seem incorrect as well. What if the damage was significantly material, say $50,000. Why would this be treated as income with no associated loss?! The security deposit is the tennant's money, held in an account under their SSN (aka it's theirs). If we use it to cover the last months rent then I agree it is rental income, but if we use it to cover damages then shouldn't those damages show up as a loss? I didn't make money here.

Expert:  Richard replied 6 years ago.

Ok...let me respond quickly and then I'm going to opt out ...


1) I referring only to an inspection fee...the cost of inspecting the property. I was not referring to all the other closing costs such as mortgage fees..which must be amortized over the life of the loan...or other costs which must be added to basis.


2) I misunderstood....when you said "break the house" I presumed you meant simply break the lease because the term "break the house" is such an odd way to refer to caused damages to the house. If the tenant breaks the lease without report the deposit as income. If it's simply a reimbursement for damage, you enter is a reimbursement of costs to repair property.


Richard and other Tax Specialists are ready to help you
Customer: replied 6 years ago.

Ok, no need to be quick to respond or to opt out, I understand some people may string you along and not pay, but I'm not one of them. Let's keep this discussion going and I'll make sure you're paid for your time. I've marked this as answered and released the $45 as a show of good faith. Given that you now know I am willing to hold up my end, I trust you will give me the appropriate amount of time.


Regarding 1)

Below is a screenprint of my HUD General Journal enrty from Quickbooks. Please let me know if you would be able to review this for me and suggest a price so I can open it as a new question for you. Please expext that we would have a few back and forth emails to ensure I am comfortable with your answers.


Regarding 2)

Forgetting about the security deposit and assuming they hand me a check for $200 to cover the damage, I'm thinking the entry would look like this:

Deposit of Their Check: Increase to Bank, Decrease to Building and Improvements

My Check to Handyman: Decrease to Bank, Increase to Building and Improvements

Or should I be using some other account?

Expert:  Richard replied 6 years ago.
Hi there. I appreciate the acceptance and certainly want your experience with JA to be a satisfactory one. I'll do my best to help you through this. How about I take a look at this and I'll give you my comments in this thread....then you can decide if you think it's worth an additional fee...if so, you can put down a bonus..totally in your discretion...and if you don't or you don't think you got your money's worth to start with, just let me know, and I'll get your original $45 refunded. Fair enough?
Expert:  Richard replied 6 years ago.

Hey there...In're doing fine. Here are my comments:


In addition to the Buildings and Improvements, you need to add an Asset such as Prepaid Mortgage Costs...and all the closing costs that relate to the Mortgage should be assigned to this account because they will be amortized over the life of the loan rather than over the life of the improvements. You might also want to split out the Buildings and Improvements (and then create subcategories under Buildings and Improvements for improvements with different depreciable lives) from the Land so its a bit easier to depreciate. The repair credit could be deductible rather than deducted from basis if it is simply for a repair rather than any capital improvement. The $700.95 in taxes can be deducted rather than capitalized. Although they are minimal and most people capitalize or amortize them over the life of the loan...many of the costs such as wire fees, wire transfer fees, document preparation, UCC fees, Tax service fee, and the small lender's inspection fee, Fed Ex fees, can probably be expensed with no real issue. Other than that, I think you've got it. Hope this helps! Let me know if you have any more specific questions.

Customer: replied 6 years ago.



Just did some homework and I can make the entries to amortize the mortgage fees over the life of the loan, thanks!


I will make subacounts under B&I for this property - one for land, then add two for each different schedule (one for the amount, the other for Accum Depreciation). I had thought the initial expenses such as Attorney's Fees should follow the same schedule as the Building's Depreciation, do you know offhand if that is true? If not I can investigate.


The repair credit did throw me for a while. If I were to deduct it, what expense account would I put it against? (just need to know what to name the account)



In addition to what is shown on the journal entry, the following transactions for this property occured prior to the closing:


- Inspections (as stated previously, this will be Inspection Expense)


- Broker Fee (was actually only $200 to the broker not 1/2 payment as originally stated. Are we saying this should be applied to B&I? Perhaps it should originally be applied to Bank Fees and then add a transaction moving it from Bank Fees to B&I at the closing?)


- $500 initial Attorney Fees (seems like it should be treated similar to the broker fee)


- $2000 Refundable Mortgage Fee (I put it to Bank Fees for now, and you can see it refunded to Bank Fees in the journal entry.)


- Property Insurance Payment (occurs yearly, so I put it to Insurance Expense)


- personal check from me as deposit on property (journal entry: Credit loan from member, Debit deposits on properties. 99% sure that's correct)





Expert:  Richard replied 6 years ago.

Attorney's fees need to be added to the basis and can allocated proportionately across land and improvements.


Set up an expense account for Repairs and put that amount there.


I would set up an account Miscellaneous Expenses and put all these small amounts in here rather than to have a separate account for each one.


If the broker fee was regard to the real estate v. the loan...add it to the basis of the of the land and improvements just as with attorney's fees.


Attorney fee - see above.

Refundable Mortgage can simply reverse the original transaction where you put it up.


Property insurance...yes you can expense that.


Personal check---yes, that is correct.


My pleasure!



Customer: replied 6 years ago.

Thanks, XXXXX XXXXX been extremely helpful.


So just to clarify the $200 Broker Fee was for the mortgage, so I am thinking of making the entries as follows:

5/2/08 - $200 Check to Broker, Expensed To Bank Fees

7/18/08 - Move the $200 back from the Bank Fees Expense Account to Prepaid Mortgage Costs


Same thing for the $500 attorney fee, except using Attorney Fees Expense account originally, and moving it to B&I during the closing


I am inclined to do it this way b/c that way it is already classed properly if the deal falls through. Does that seem correct?

Expert:  Richard replied 6 years ago.
I concur with your assessment. You take care!