Is lost deposit tax dedutible?

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freestuff_IHB

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<p>All the experts out there,</p>

<p>I am an unlucky one here. I lost about $10K deposit money from backing out a condo purchase agreement. Now, it is tax time. I am wondering if this loss is tax dedutible? If it is dedutible, what form should I use? Before I go to an accountant, I just like to have some idea myself first.</p>

<p>Thanks.</p>
 
<p>No, you can't deduct forfeited deposits, lost down payments, or earnest money.</p>

<p>See bottom of page 2, middle column:</p>

<p><a href="http://www.irs.gov/pub/irs-pdf/p530.pdf">http://www.irs.gov/pub/irs-pdf/p530.pdf</a></p>

<p>This would definitely be true in terms of a purchase of a home as a primary residence. </p>
 
<p>All I can say is what a crock of ess (that it isn't deductible). I guess we are supposed to be thankful that we don't pay regular sales tax on the deposit!</p>

<p>SCHB</p>
 
freestuff I am sure losing $10k stings more than a bit. But do you feel better about backing out or do you think you should have just gone through with the purchase?
 
<p>Sheez, people are sure being chincy with the Thank Yous lately. I even gave a link to the IRS pub and directions on where to find the confirming info. My gosh, what does a guy have to do around here to get some love!</p>

<p></p>
 
<p>ipoplaya</p>

<p> "<em>My gosh, what does a guy have to do around here to get some love!"</em> </p>

<p> Answer- "send money, guns, and laywers!' (words from an old song for those who don't remember it.</p>

<p>Enjoy!</p>

<p> </p>
 
<p>Thanks the replies. You guys are really knowledgeable. </p>

<p>I know that it is not deductible for primary residence as ipoplaya pointed out. But my intended purchase was for rental purpose. I already have other rental properties. I have rental income and expense.</p>

<p>Anybody knows?</p>

<p> </p>
 
<p>If the purchase was for profit/investment, the loss should be deductible. </p>

<p>My guess is that it would be classed as a short-term capital loss on your Schedule D. </p>

<p>I haven't done one of these though on a return before though so I'm not sure... It would be nice to get as some type of unlimited deduction but you might have to get creative. If you could claim fraud, you could take it as a section 165 loss.</p>
 
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