Posted by Chuck Perry - TX on January 04, 2002 at 22:11:38:
I have a simular situation with a deal that will close this month. Look forward to the answer.
Additional: If the funds are from the seller and it does not show on the HUD, have we committed lender fraud?
Thanks,
Chuck
Repair funds from seller - Posted by Garth - OH
Posted by Garth - OH on January 04, 2002 at 19:15:44:
I have an accountant setting up my Quickbooks accounts that doesn’t know how to deal with this situation:
What are the tax implications of receiving repair funds back (outside of closing) on a purchase of rental property? I imagine if the funds were spent entirely on repairs during the tax year, then the expense cancels out the income. Otherwise should I set up an accrual account for repair funds not expended? I do not expect to spend the entire amount on repairs. Does this count as income during the tax year received or when the property is sold? Thanks for your help.
Re: Repair funds from seller - Posted by JHyre in Ohio
Posted by JHyre in Ohio on January 05, 2002 at 07:09:11:
If you are on the cash method, the funds are income in the year received. Once taken into income, the cash is treated as any other recieved via rental payments are sales proceeds. If subsequently used for repairs, they are deductible…make sure both transactions hit the books…do simply “net” them.
John Hyre