wrote:

- quote -

If you luck out and sell the house for a $1 million profit,
the cost basis matters. If the profit is under the
exclusion limit, it doesn't.

Seth

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I intend to live in the house that I'll build on this lot
for more than 2 years to avoid capital gains. Would that
matter then what my cost basis was? If I decided to flip
the property then I inagine I would have to reduce by cost
basis by the check, but would that matter after 2 years of
living in that house?

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ew1077[at]yahoo.com wrote:

- quote -

As posted on another group, the timing of the commission
"rebate" may determine its legality and tax consequence:

While this site

http://www.rebatereps.com/faq.html

is by no means a legal reference, this excerpt seems to be
on point:

Question:
Does the rebate have to be listed on the HUD-1 statement,
or can it be given after closing?

Answer:
According to Fannie Mae guidelines and federal laws, all
credits must be given on the settlement statement (not after
closing). Failure to disclose the payment to the buyer on
the settlement statement can constitute a "false statement
to a lender" (a federal crime), and also a violation of the
License Law and Commission rules. You can read an email to
us written from HUD on this issue. You can also read what a
state real estate commission wrote about this federal
statute. As long as the rebate is listed on the HUD-1, it is
perfectly fine in the majority of states, and most lenders
do allow the rebate on the HUD-1. However, if your lender
will not allow the rebate on the HUD-1, then the only way
for you to get the credit would be to have the seller lower
the sales price by the amount of the rebate. It is the
buyer's responsibility to ensure they have selected a lender
who will allow the rebate on the HUD-1 statement.

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ew1077[at]yahoo.com wrote:

- quote -

What is it with these real estate people these day?

It is not income to you, but simply a reduction in your
purchase price. Don't worry about it. If she does send you
a 1099misc send it back to her (a copy of course) and say
"no thank you".

And if IRS ever later questions you on it, respond and
document the facts.

One aspect of this pertaining to the realtor might be the
"gift" aspect, for business gifts are subject to a 25$ limit
as a business deduction. But she won't bother with that,
I'm sure.

ChEAr$,
Harlan Lunsford, EA n LA

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<ew1077[at]yahoo.com> wrote:

- quote -

I think it's a reduction in the cost (basis) of the property.

Seth

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ew1...[at]yahoo.com wrote:

- quote -

If she deducts it as business expense, then it's not a gift.
Gift cannot be deducted.

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ew1077[at]yahoo.com wrote:

- quote -

If she is actually sharing commissions, then anyone who
receives a payment from her does have commission income and
must report it as taxable gross income. It wouldn't matter
whether she sends or doesn't send the 1099. If on the other
hand she is merely saying thank you, then it is a gift and
does not have to be reported as income.

As to her tax return: if she is sharing commissions, then
she would only report her net (gross less the amount shared)
commission as income on her business tax return. If she is
making a gift, then she would report her gross commission
and get no tax deduction for the gift to an individual.

--
Alan
http://taxtopics.net

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I just purchased a land for $165,000. My broker got $4,025
commission and cut me a business check for $1,650 as a
"thank-you". I imagine she will deduct $1,625 from her
original income. Does it mean I have to report it to IRS as
income on my tax return and pay taxes on it? She claims I
can treat it as a gift and don't have to report on tax
return. Can I trust her? Does she have to send me a
1099-misc at the end of the year? She claims she's been
sharing her commission with clients for years, never send
1099-misc, and none of them had any problems with IRS.
Please let me know. I haven't cashed her check yet but
could definitely use the money.

Thanks!!!

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