I guess it would depend on the contract language, but if buyer failed to perform isn't the deposit treated as liquidated damages in lieu of suing for actual damages / demanding specific performance?
If that's true wouldn't the deposit be treated like any other monetary damage award for tax purposes?
scott s.
So it's taxable to the extent it exceeds the seller's _deductible_ expenses on the transaction? OK, but those would be deductible anyway. Seth
I understand your logic. But, once again, I think the EXACT facts of the particular situation would need to be carefully analyzed. For example, I'm not sure that an "abandonment" theory would apply if the forfeiture was due to the taxpayer's failure to perform, etc. But I agree, it could be an open question with multiple arguably acceptable tax outcomes. MTW
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