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Happy Tax Day !!
Does anyone know & is willing to share the IRC section or paragraph that concerns what we’ve all heard, that being: an Option fee paid to us is not taxable until either 1) the house is purchased or 2) the option is not exercised (ie lease broken/expired)?
The IRS agent I’m working with doesn’t know where to look to confirm what we’ve all learned.
May you never be blessed with an audit ! Mine’s almost satisfactorily over I think.
Thanks,
Hank
Since I don’t sell with a lease option I’ve never checked it out. Call Peter Fortunato, he will know
Wow, you have to train your own proctologist?
Tell the guy to look at Section 1921 … while it pertains specifically to “stock” options, there’s a supporting publication (that I can’t find) that says unless specifically excluded, this is how options should be treated.
In section 1921 ” Writers of Stock Options (That’s you) If a taxpayer writes a call or put, the amount received is not included in income at the time of receipt.” Instead it is deferred until 1) the obligation expires, 2) the option is exercised or 3) the writer engages in a closing transaction.”
There’s more detail there, but ask the bureaucrat why a property option would be treated any differently.
Call or email me if you want to discuss further.
Best to you!
Reg 1.1234
But it does not state it explicitly. This article explains the rational for it being tax deferred.
http://www.wkblaw.com/articles/article_105.pdf
Good luck.
Pedro
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