Steve M Posted October 18, 2007 Report Share Posted October 18, 2007 A client paid $17000 as a deposit on a new build home for speculation. Because he couldn't sell another property in time, he lost his $17,000 deposit. Is there any deduction for this since he actually never closed on the property? Also he is an individual, not a corp or LLC, so I can't see writing it off as a business loss. Would value your opinions. Steve M Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted October 18, 2007 Report Share Posted October 18, 2007 Was he intending to live in this house? Or planning to buy it then resell it? Quote Link to comment Share on other sites More sharing options...
Steve M Posted October 18, 2007 Author Report Share Posted October 18, 2007 A client paid $17000 as a deposit on a new build home for speculation. Because he couldn't sell another property in time, he lost his $17,000 deposit. Is there any deduction for this since he actually never closed on the property? Also he is an individual, not a corp or LLC, so I can't see writing it off as a business loss. Would value your opinions. Steve M He was planning to resell it, but he used personal funds for the deposit. He didn't place the money into a corp or LLC. Quote Link to comment Share on other sites More sharing options...
JohnH Posted October 18, 2007 Report Share Posted October 18, 2007 Do you know if he filled out any loan documents or applications claiming this was gonig to be his personal residence in order to get a lower interest rate? If so, he may have a problem. Quote Link to comment Share on other sites More sharing options...
Steve M Posted October 19, 2007 Author Report Share Posted October 19, 2007 He was planning to resell it, but he used personal funds for the deposit. He didn't place the money into a corp or LLC. I know he didn't apply for a loan for a personal residence; however, my question really regards can he claim the loss for a rental property because he never owned the property. He didn't lose money on the property because it was never his, so therefore, how can he claim the $17000 loss- or can he? I don't think it is a short term capital loss, so what would it be if anything? Steve M Quote Link to comment Share on other sites More sharing options...
Redneck Posted October 19, 2007 Report Share Posted October 19, 2007 I know he didn't apply for a loan for a personal residence; however, my question really regards can he claim the loss for a rental property because he never owned the property. He didn't lose money on the property because it was never his, so therefore, how can he claim the $17000 loss- or can he? I don't think it is a short term capital loss, so what would it be if anything? Steve M This might help: http://www.taxalmanac.org/index.php/Discus...te_deposit_lost Quote Link to comment Share on other sites More sharing options...
OldJack Posted October 20, 2007 Report Share Posted October 20, 2007 Maybe you should just ask yourself, would the deposit have been deductible if he had not lost it? Quote Link to comment Share on other sites More sharing options...
Steve M Posted October 20, 2007 Author Report Share Posted October 20, 2007 I know he didn't apply for a loan for a personal residence; however, my question really regards can he claim the loss for a rental property because he never owned the property. He didn't lose money on the property because it was never his, so therefore, how can he claim the $17000 loss- or can he? I don't think it is a short term capital loss, so what would it be if anything? Steve M Thanks everyone for your opinions. Especially Redneck for directing me to the Section 1234A . That was very helpful. Steve M Quote Link to comment Share on other sites More sharing options...
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