Discussion:Deposit on real estate sale that did not go through

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Discussion Forum Index --> Tax Questions --> Deposit on real estate sale that did not go through

Kathyt (talk|edits) said:

11 October 2006
seller collected a deposit on the sale of land but the sale didn't go through and seller got to keep the deposit. Is that ordinary income or capital?

Chautauqua (talk|edits) said:

11 October 2006
I vote for ordinary income.

JR1 (talk|edits) said:

October 11, 2006
Aye

Dennis (talk|edits) said:

11 October 2006
Nay.

Kathyt (talk|edits) said:

12 October 2006
Found my answer, I'm posting in case anyone was wondering. Dennis, you win the prize. 
Sec. 1234A. Gains or losses from certain terminations

     Gain or loss attributable to the cancellation, lapse, expiration,
   or other termination of -
       (1) a right or obligation (other than a securities futures
     contract, as defined in section 1234B) with respect to property
     which is (or on acquisition would be) a capital asset in the
     hands of the taxpayer, or
       (2) a section 1256 contract (as defined in section 1256) not
     described in paragraph (1) which is a capital asset in the hands
     of the taxpayer, 
   shall be treated as gain or loss from the sale of a capital asset.
   The preceding sentence shall not apply to the retirement of any
   debt instrument (whether or not through a trust or other
   participation arrangement).

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