On Mar 22, 5:19*pm, Harlan Lunsford <hnslunsf...[at]bellsouth.net> wrote:
- quote -

I believe the concensus is that this payment needs to be claimed as
ordinary income. I will pass along this advise.
I don't believe the IRS will have the ability to have known of this
transaction but I'm sure they will be grateful of his honesty and
willingness to declare. That is the way he was brought up.
Thank you for your time and inputs.

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Stuart Bronstein <spamtrap[at]lexregia.com> writes:

- quote -

Neither. If a written call expires worthless, you have a short-term
capital gain which belongs to the tax year in which the option
expired.

If instead the option is exercised against the stock you own,
the option premium is added to the sales proceeds of the stock
that was called away from you.

--
Rich Carreiro rlc-news[at]rlcarr.com

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Harlan Lunsford <hnslunsford[at]bellsouth.net> wrote:
- quote -

I agree with you, Harlan. I think an analogous situation would be
writing call options on stock you own. Assuming the call expires
unused, do you claim that as income when received, or as part of the
sale price in the year when it is eventually sold?

Stu

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Bill wrote:
- quote -

I'm of a different opinion, Bill, since this was a separate transaction
which will have occurred well before the (eventual) sale of the house.
Doesn't matter that it might be in the same year.

For a client of mine, I would list it as you first said, "other income".

ChEAr$,
Harlan Lunsford, EA n LA

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taxlover[at]yahoo.com (Taxlover) posted:

- quote -

Yes it possibly could, in the event that occurs within the same tax
year. Frankly, I was reflecting the dire real estate market conditions
-- which undoubtedly led to the original cancellation event -- and
assumed there was enough doubt about a replacement buyer to plan for
handling the status quo situation.

Bill

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- quote -

Couldn't it be thrown in with what he eventually sells his house for, paying
capital gains on it as appropriate?

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ollie24018[at]yahoo.com posted:

- quote -

Yes. In effect, your son sold his property, but then permitted the
buyer to withdraw from the contract in return for a $15,000 fee. That
is income and should be reported. I would suggest it might be
classified as "other income" and reported on line 21 of Form 1040. (I'm
assuming he isn't in the real estate business.)

Depending on your son's total income, he should either increase his
withholding or arrange to make estimated tax payments to offset the
additional tax he will owe for 2008. Under the circumstances, it might
be worth his while to seek guidance from a tax advisor.

Bill

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My son had a signed contract to sell his property. The buyer wanted
desperately to get out of the contract for the house and paid him a
sum of $15,000 to release him from this obligation. This just
happened this week. The contract was voided and all went on their way.
My son asked if he must claim this $15,000 as income when he files his
return next year.

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