It was an Earnest Money deposit, which according to our contract was non-refundable after the due diligence period. I’m not sure how to categorize it more specifically but 100% of it was lost as EM. I suppose it wouldn’t have been lost if it had been applied towards the purchase like it was supposed to be… If all had gone as planned it would have been part of the down payment. The contract expiration was outside of our control as the local zoning commission put a stop on our project and ultimately the purchase altogether- that’s why we forfeited the EM.
We saved the money for the down payment in our work account, although much of it was transferred in from personal investment into the business. We treated the money we saved a bit too flexibly perhaps (which we mentally justified because we were going to reside in the house above the studio after purchasing). As a single member LLC there’s never been a definitive, organized separation of finances for me…is this something that would prevent us from claiming the capital loss?
Despite a slight bit of chaos in the bookkeeping, it was definitely a business purchase and would have been financed solely in my business’s name. I’m not sure what documentation I could use to support this other than maybe our loan application to show intent?
I think if there is one lesson I learned through all of this it is that entangled work and personal finances are a no-go. Thanks for taking the time to answer and help us get this sorted out!
