Frank Chin - Accounting for Option Consideration - Posted by mei122@aol.com

Real Estate Investing Real Estate Law
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Posted by Ernie Mullins on November 19, 2004 at 03:07:38:

Excerpts From The First Annual Nerd Bowl (#2)
(held during Super Bowl Sunday 2000 at the Silicon Valley Transmeta Dome)

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DUMBELL: Linus is now waving to the crowd… Oops! He just belched.
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Frank Chin - Accounting for Option Consideration - Posted by mei122@aol.com

Posted by mei122@aol.com on June 07, 2004 at 22:32:27:

Hello all. I am in the process of leasing a property with the option to buy to a person. He will give me $10,000 for option consideration. I know that option consideration is not considered income until the year when the option is exercised. I use Quickbooks to handle my bookkeeping needs. How will I record the option consideration? I know that I will debit “cash”, but what account will I credit?

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Option Consideration - Posted by David Krulac

Posted by David Krulac on June 09, 2004 at 16:49:45:

option consideration is NON-TAXABLE until either:

  1. the option is exercised, then it could be long term capital gains Fed Taxed at 15%

  2. The option expires in which case the option consideration is ordinary income taxed Fed at up to 38%

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Re: Frank Chin - Accounting for Option … - Posted by Frank Chin

Posted by Frank Chin on June 08, 2004 at 04:33:02:

Mei:

It’ll sit in a liability account till such time its excercised, then it becomes income, so you credit a liability account.

In John Hyres “KISS GUIDE”, he books it to a Deposit Payable account.

Frank Chin

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You’re right … - Posted by Frank Chin

Posted by Frank Chin on June 09, 2004 at 18:03:31:

So at this point, the bookkeeping entry would be to Debit the Payable Account and Credit the appropriate Income or Gain account depending on excercise or expiration.

Frank Chin