Discussion:Property Settlement
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Discussion Forum Index --> Advanced Tax Questions --> Property Settlement
Discussion Forum Index --> Tax Questions --> Property Settlement
McKinney & Company (talk|edits) said: | 9 May 2008 |
| Several years ago, my client gave $50,000 to another individual to purchase investment properties together. A dispute arose and now my client will receive as a settlement a property worth $600,000.
1 - I believe my client now has a property with a basis of $50,000. The opposing attorney says my client has to report $600,000 of income from the settlement - even though she has no current plans to sell the property. Who is right? 2 - If the opposing attorney is correct, is the income ordinary or capital gain? Thanks | |
Nancyshoemake (talk|edits) said: | 9 May 2008 |
| Not a shabby deal - invest $50k and receive $600k a couple years later. Can I have his phone number please? On a serious note, it would be helpful having a bit more information. Did he invest in an LLC? Did he just "write a check to an individual"? Has he filed a Schedule E? Any K-1? This property he is receiving - what type of entity was it in...transfer, etc...? | |
RoyDaleOne (talk|edits) said: | 9 May 2008 |
| Origin of suit, also called, cause of action, is the test to use.
What was the dispute? | |
| 9 May 2008 | |
| Your client has $550,000 in income unless you can somehow qualify this as an involuntary conversion. | |
| 10 May 2008 | |
| Where does the attorney come up with the idea that $600,000 is taxable to you? Is his client actually out $550,000 cash? This doesn't pass the smell test. | |
| 12 May 2008 | |
| We really don't have enough information to really determine the taxability of the settlement. For example, the $600,000 could be excludible under Subchapter K if the plaintiff and defendant were operating as a partnership. However, Sec. 61 is not restricted to income received in the form of cash. | |
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