If a real estate agent is purchasing a property, represents themselves as Buyer’s Agent, and credits/rebates their commission to themselves: would this commission rebate be considered a non-taxable event (reduction in cost basis of property) just as if they had given said commission rebate to a client that was not themselves? In other words, does the fact that the Buyer happens to also be the Buyer’s Agent make this otherwise non-taxable commission rebate taxable?
Within the context of the above, the primary question is the following: should an employing broker issue a 1099-MISC to one of their agents who represented themselves as Buyer's Agent, and credited their entire commission as Buyer's Agent to themselves as Buyer?
Assuming the realtor operates as an independent contractor:
If the realtor/agent reports their full commission as income on line 1 of his or her Schedule C, the realtor/agent may then deduct the rebated amount on that Schedule C.
The realtor/buyer must then reduce their cost basis in the home by the amount of the rebate.
My wife (a licensed realtor) represented us as the Buyers Agent when purchasing our new home. The seller credited her commission back to the Buyer (i.e. my wife and I) during Closing.
1) Would this still be treated as a non-taxable event (reduction in the cost basis of the home)?
2) Is this reportable as income when we file our taxes? Neither our closing attorney or the seller has sent us 1099
2. No. Logically follows from (1).
Here's an IRS letter on the topic: <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-wd/0721013.pdf">https://www.irs.gov/pub/irs-wd/0721013.pdf</a>
Note that a 1099 should NOT be issued to the buyer for the rebate amount.