Discussion:Property Purchase J.E. question
From TaxAlmanac
←Older revision | Newer revision→
Discussion Forum Index --> Accounting Questions --> Property Purchase J.E. question
| 29 May 2009 | |
From a buyer perspective. I was wondering how to book the property taxes paid at closing by the seller that show up as a credit on the borrower statement. For example here are the numbers from the Borrower statement.
Debit Credit Purchase Price 1,100,000.00 Settlement Charges 13,013.45 Attorney's Fees 10,000.00 Depostit/Earnest $ 25,000.00 Prinipal Amt of New Loan 825,000.00 County Taxes(01/01/07-08/31/07) 6,716.60 Amount Due From Borrower 266,296.85 Note: The Deposit and the amount due from borrower at closing were paid by another LLC (Loans from the other company) My big question is how to book the County taxes since the taxes were not paid by the Purchaser until 2008. Normally if the taxes were paid in 2007 the tax expense category would be the net between the amount actually paid and the credit for taxes paid by the seller at closing. Since taxes weren't paid until 2008 that would leave a credit balance in my property tax expense category. It is my understanding that you cannot accrue property taxes and expense them unless you actually pay them in that tax year. Any help would be greatly appreciated. | |
| 29 May 2009 | |
| book them on the balance sheet instead of the income statement | |
| 1 June 2009 | |
| That makes sense. I have included all settlement charges and attorney's fees in the basis of the property, and created a Notes Payable for both loans. My biggest question is how to handle the credit received from the seller for the prorated property taxes. I have put the credit in Accounts payable since we the property taxes were not paid until the following year. This way when the taxes were paid in 2008, I can Credit Cash, Debit A/P, and Debit Tax Expense for the difference. My big question is that if they are reporting on the cash basis can I have A/P account with a balance at year end and report it on the return? Kevinh5...Thanks for the post. I appreciate your help. I have been going through my tax guide and the IRS website, and have had trouble coming up with a definitive answer. | |
