On Jan 22, 8:51*am, Bill Brown <brow...[at]longwood.edu> wrote:
- quote -


Bill, just for clarification, the tax in question is NOT a real estate
transfer tax.

Katie in San Diego

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Phil Marti wrote:
- quote -

If it is STILL a rental. However sometimes a property ceases to be a
rental property and just sits around until sold, in which case these
repairs would form part of basis and thereby reduce gain.
- quote -

I think these expenditures would properly be capitalized.
- quote -

Yes, I knew what your point was of course. And well taken, too.

ChEAr$,
Harlan Lunsford, EA n LA

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On Jan 22, 11:03 am, Rick Blaine <d...[at]bother.com> wrote:
- quote -

response changes my response of January 20th. If the seller pays the
tax, the tax reduces his proceeds on the sale of the property and
thus, reduces his gain or increases his loss.

If the buyer pays the tax, the tax increases his basis in the
property.

Real estate transfer taxes are NOT general sales taxes that are
deductible (when the taxpayer elects state sales taxes instead of
state income taxes) on schedule A.

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Katie <katiej_1958[at]yahoo.com> wrote:

- quote -

(Incredibly comprehensive reply trimmed for space)

- quote -


Wow. Thank you very much. That was exactly what I was looking for.

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"Harlan Lunsford" wrote:

- quote -

If it's a rental, fix-up repairs are deductible on Schedule E as repairs,
not as a cost of sale.

If it's non-rental investment property, repairs would be a cost of
maintaining it. Without looking it up, I'm not sure how that's treated, but
my guess would be a Schedule A miscellaneous itemized deduction for
investment expenses.

My point was to address the longstanding misconception that fix-up expenses
prior to sale of a personal residence have ever (at least since 1971) been
deductible. Many people got confused because of the old rules for deferring
gain on such sales, which allowed you to consider these expenses in
determining the required cost of the new residence, but didn't allow them in
the calculation of gain.
--
Phil Marti
Clarksburg, MD

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On Jan 21, 4:05*pm, Rick Blaine <d...[at]bother.com> wrote:
- quote -


The New Mexico law is interesting because it is not technically a
sales tax. It is really a gross receipts tax that is imposed on the
seller. The seller is allowed to collect reimbursement of the tax
from the purchaser, but is not required to do so, and such
reimbursement appears to be a matter of contract between seller and
purchaser. Even if the purchaser reimburses the seller for the tax,
it is still the SELLER's tax; the purchaser is not the taxpayer.

As a result the tax is applicable, for example, to the gross receipts
from sales to the U.S. Government or to an Indian tribe for services
performed on the reservation. Even when the tax is passed through to
the government or the tribe, it is not imposed on that entity, and
therefore such a sale is not exempt from the tax. MESCALERO APACHE
TRIBE v. NEW MEXICO, 625 F2d 967, 06/05/1980 (cert. denied).

So that made me wonder whether the tax you paid on the real estate
agent's commission would be a deductible sales tax for federal income
tax purposes. After all, it's not your tax liability; the agent is
clearly the taxpayer. I think it is, oddly enough <G> . IRC Sec.
164(b)(5)(B) defines a "general sales tax" as a "tax imposed at one
rate with respect to the sale at retail of a broad range of classes of
items." Notice it doesn't say who the taxpayer has to be, and the NM
tax fits that definition. Sec. 164(b)(5)(G) says, "If the amount of
any general sales tax is separately stated, then, to the extent that
the amount so stated is paid by the consumer (other than in connection
with the consumer's trade or business) to the seller, such amount
shall be treated as a tax imposed on, and paid by, such consumer." So
it appears that as long as the tax was separately stated on the
closing statement, it's considered to be your tax liability, even
though legally it is not yours.

So ... if you kept track of all the gross receipts tax reimbursements
and compensating use taxes that you paid during the year, I think you
could deduct them on Schedule A as sales taxes. However, you cannot
add this item (the tax on the real estate commission) to the table
amount; you'd have to have kept track of everything. (The services of
a real estate agent are not among the items that can be added to the
table amount.) Under the circumstances, while technically I think you
could deduct it as a sales tax, you'd be better off to treat it as a
cost of the sale (which it clearly is), reducing the gain or loss on
the sale transaction. Of course, if this was a sale of your
qualifying personal residence, the gain may be wholly or partially
excludable under IRC Sec. 121, and any loss is not deductible.

Katie in San Diego

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"Phil Marti" <prm20871[at]verizon.net> wrote:

- quote -

As you say. I thought there used to be an exception for repairs/cleanup done
immediately prior to the sale, but in reviewing Pub 523, there is no mention of
that.

========================================= MODERATOR'S COMMENT:
And those fix-up costs went on the old Form 2119, which was
retired effective May 7, 1997.

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Phil Marti wrote:
- quote -

personal residence?

ChEAr$,
Harlan Lunsford, EA n LA

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"Rick Blaine" wrote:

- quote -

Repairs are not an allowable expense of sale.

--
Phil Marti
Clarksburg, MD

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"D. Stussy" wrote:

- quote -

For reasons I can't begin to divine I got the OP switched to the other side
of the HUD-1 in my mind. Thanks for the catch. I agree that if not
deducted as sales tax it's an expense of sale.

However, "add it to the basis" may have still been right. If a 1099-S is
issued, it's not likely to reflect any expenses of sale, in which case I'd
add all of them to basis rather than reducing the reported sale proceeds.

--
Phil Marti
Clarksburg, MD

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"D. Stussy" <spam[at]bde-arc.ampr.org> wrote:

- quote -

Yes, clearly it could be considered a transaction expense along the lines of
appraisals, seller warranties, last minute repairs, title costs, etc. What I was
wondering is if there were special provisions for state sales taxes on the
transaction.

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"scott s." <75270_3703a[at]csi.xcom> wrote:

- quote -

The local custom seems to be for the agencies involved to pass the tax through
to the seller, much as a doctor would charge a patient or a plumber a home
owner. For example, if the charge for services was $100, the patient will pay
$106. The tax will not be imputed to be within the $100.

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Katie <katiej_1958[at]yahoo.com> wrote:

- quote -

Yes.

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"Phil Marti" <prm20871[at]verizon.net> wrote in
news:O_Pkj.21415$8A4.11808[at]trnddc02:

- quote -

My wife is a commissions-based real estate agent in such a state
(Hawaii). It has been the custom in the past that the Gross Excise
Tax (which she is liable for, not seller) is included in the
customary 6% commission. There has been an effort by the company
(and no doubt others) to separately list the Gross Excise Tax, as
is permitted by Hi DoTax for retail transactions, resulting in
a commission (in this case the 3% due to each broker/agent) plus
the 4.5 % (actually 4.71 because it's inclusive) GET. It's really
just a way to increase commissions. There is a provision in the
IRC for itemizers who elect to deduct state sales tax to count
the GET when it is separately stated on a sales slip or invoice.
- quote -

some cases buyer signs a representation contract agreeing to
pay the GET to buyer's agent). I suspect maybe the buyer could
include it within the "sales tax" paid for sked A.

scott s.
..

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On Jan 19, 10:14*pm, Rick Blaine <d...[at]bother.com> wrote:
- quote -


What state are we talking about here? New Mexico? Hawaii? Washington?

It may make a difference.

Katie in San Diego

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"Phil Marti" <prm20871[at]verizon.net> wrote in message
news:O_Pkj.21415$8A4.11808[at]trnddc02...
- quote -

What basis? He's selling the property, not buying it. I would add it to
the cost of the sale.

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"Rick Blaine"wrote:

- quote -

The identity of the payer was missing from the OP.

- quote -

Also new information. In the OP, it was a "gross receipts" tax, which is a
form of income tax, not sales tax.

- quote -

Correct. Plus it must be a "general" tax, as opposed to the transfer taxes
that you (or the buyer) may also have paid. Is there a general rate for
sales of goods and services? That would be the amount that would be
deductible as sales tax.

If you don't take the sales tax deduction for the year in question, the tax
paid would add to your basis.

--
Phil Marti
Clarksburg, MD

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"Phil Marti" <prm20871[at]verizon.net> wrote:

- quote -

Deductability of expenses/taxes generally falls on the person who paid them.
Since I have a HUD-1 that shows that I (the seller) paid those taxes, it would
follow that if they are deductable, I would be the person to take the deduction.

It's a somewhat unusual situation as most states have sales taxes. A few,
including this one, have a goods & services tax, which is much more broadly
applied.

I suspect it will only be deductible if I opt for the sales tax deduction
instead of the income tax deduction.

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On Jan 20, 1:14*am, Rick Blaine <d...[at]bother.com> wrote:
- quote -

It reduces your net proceeds on the sale which means in decreases your
gain on the sale or increases your loss.

If it was a personal residence any loss is NOT deductible. Any gain
MIGHT be reduced by the Section 121 exclusion.

The transfer tax is NOT deductible as a separate item on your tax
return.

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Rick Blaine wrote:
- quote -

residence or rental property.

Certainly if the tax were imposed on the agents and therefore not on
you, it would not be deductible on schedule a. Perhaps it is listed on
the settlement sheet as a charge to you, the seller. In this case it
would factor in reductions in sale value, thus lessening your gain to be
reported to IRS. Of course if it was a personal residence, you might
not even be reporting gain if it's under 250,000$.

ChEAr$,
Harlan Lunsford, EA n LA

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