Posted by Ernest Tew on March 15, 2004 at 19:27:55:
It doesn’t matter very much what you call option money that was forfeited. For income tax purposes, it becomes ordinary income and is fully taxable.
However, had they exercised the option, it would have been a capital gain. Capital gains are taxed at a lower rate if the property has been held for more than one year. Otherwise, it is a short-term gain and taxed at the same rate as other ordinary income.
Option Money – how do we account? - Posted by chill
Posted by chill on March 12, 2004 at 07:55:26:
We sold an Option on a mobile home with a lease. After buying the option and paying the rent for a little over a year, the tenants have vacated the house. At this point, what do we call the Option Money for accounting purposes? While it was unexercised we held it as a liability account. Now that they forfeited it, it is not really a “sale” – is it capital gain or just rental income?
Thanks.
Re: Option Money – how do we account? - Posted by NH_Bert
Posted by NH_Bert on March 14, 2004 at 15:15:58:
Sounds like rent to me.
My contract states that any unexcercised $$ becomes rent $$ if the Buyer defaults.