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fredavera
New Member

I made a cash payment to a tenant to induce him to move out of a duplex so it could be sold. I will have a long term capital gain. Can I claim the payment as cost of sale

Duplex was inherited from Mom. She rented to tenant well below market and promised him he would always have an affordable place to live. I feel bound by that promise. The payment is to allow him to purchase a residence with payments not greater than his current rent. I would like to treat the payment as a cost of sale akin to a realtors fee or expenses to prepare for sale.
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MichaelL1
Level 15

I made a cash payment to a tenant to induce him to move out of a duplex so it could be sold. I will have a long term capital gain. Can I claim the payment as cost of sale

Let's start with the Duplex, your basis or cost in it will be the fair market value on the date of death.  And yes, it is capital gain (due to inherited property).  It is reported in the investment sale area as other.

To enter your Investments sold

Click on Federal Taxes

Click on Wages and Income

Click on I'll choose what I work on

Scroll down to Investments

On Stocks, Bonds, Other, click the start or update button

--------------------

Now for the costs of getting the tenant out.  This is a somewhat gray area, as it appears the money given is more than just a month's worth of rent to vacate the property.  If it is truly cost to get him out to sell the property and is not a gift, then yes it is a selling expense.  Just document what you did and why you did it.  

I know from folks that rent, if they have a bad renter they will pay them to leave, even when they have damaged the place just to get them out of there and cut the losses. 

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1 Reply
MichaelL1
Level 15

I made a cash payment to a tenant to induce him to move out of a duplex so it could be sold. I will have a long term capital gain. Can I claim the payment as cost of sale

Let's start with the Duplex, your basis or cost in it will be the fair market value on the date of death.  And yes, it is capital gain (due to inherited property).  It is reported in the investment sale area as other.

To enter your Investments sold

Click on Federal Taxes

Click on Wages and Income

Click on I'll choose what I work on

Scroll down to Investments

On Stocks, Bonds, Other, click the start or update button

--------------------

Now for the costs of getting the tenant out.  This is a somewhat gray area, as it appears the money given is more than just a month's worth of rent to vacate the property.  If it is truly cost to get him out to sell the property and is not a gift, then yes it is a selling expense.  Just document what you did and why you did it.  

I know from folks that rent, if they have a bad renter they will pay them to leave, even when they have damaged the place just to get them out of there and cut the losses. 

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