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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 742
Experience:  Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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We have a client who owns a rental property and was

Customer Question

We have a client who owns a rental property and was receiving sale option money over many years and was showing that as a liability until the escrow was terminated and the buyer walked away from his option payments. We have picked that up as ordinary income which seems to be very clear. The question is is this income passive income where we can apply this income to passive losses from other rental properties
JA: The Expert will know how to help. Is there anything else important you think the Expert should know?
Customer: No
Submitted: 1 month ago.
Category: Tax
Expert:  taxmanrog replied 1 month ago.

Welcome to Just Answer! Thank you for giving me the opportunity to assist you! I will do my best to help!

Please give me a few minutes to type my response.

Expert:  taxmanrog replied 1 month ago.

The character of income always follows the character of the asset. You sold the rental property, which resulted in a capital gain or loss. The termination of the sales option is related to the sale, not to the rental, of the building. Therefore, the income would be capital.

I hope this answers your question. If you have any more, please feel free to ask and I will be happy to answer.

Thanks! Have a great week!

Roger

Expert:  taxmanrog replied 1 month ago.

I have not heard back from you. Do you have any further questions?

If not, please don't forget to rate me. It is how the questions are closed.

Thanks!

Roger