Discussion:Down payment on office space
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Discussion Forum Index --> Advanced Tax Questions --> Down payment on office space
Discussion Forum Index --> Tax Questions --> Down payment on office space
| 28 July 2009 | |
| Hi Guys,
A client,LLC, gets into contract to purchase an office space. Puts 10% down but unable to secure financing and forced to give up the down payment. The business is in its first year of operations in marketing. Can the down payment be deducted on the tax return and if so, how? Thank you very much for any help. | |
| 28 July 2009 | |
| here's an honest answer: yes, by putting it on the tax return under 'other deductions'. | |
| 28 July 2009 | |
| Would it be considered "ordinary & necessary" expense if challenged? The amount involved is 80K... | |
| 28 July 2009 | |
| Probably but that would depend on the particular tax agent | |
| 29 July 2009 | |
| Sec. 165(c)(2) loss
Earnest Goes to Jail Earnest Goes to Camp Which ones am I leaving out? Hint.. Wink.. | |
| 1 August 2009 | |
| Greetings, Sashka. It is not clear from the facts if this Limited Liability Company intended to purchase an office building - with an $ 80,000.00 down payment - of if the $ 80,000.00 is a security deposit, paid with the intention of renting an office within an office building. | |
RoyDaleOne (talk|edits) said: | 1 August 2009 |
| I don't think it matters if the 80k was a lost down payment, or a lost deposit, along as the contract involved provided for the forfeiture of the 80k. | |
| 1 August 2009 | |
| Normally in purchase agreements there is a clause that the purchaser will get his deposit back if he cannot obtain financing. Are you sure you have the whole story here? | |
| 2 August 2009 | |
| I see this as an ordinary loss under 165. The ordinary and necessary requirement does not apply since this is not a 162 expense. | |
| 2 August 2009 | |
| I agree with Taxteck - which would put the loss onto form 4797.
The bad news about this treatment is that it doesn't reduce SE income. | |
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