If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves
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New Member

If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves

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?

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Level 14

If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves

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.  

**Answers are correct to the best of my ability but do not constitute tax or legal advice.**

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New Member

If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves

Thank you very much for your reply. Within the context of the original question, the primary purpose of our question is to determine the following: should an employing broker issue a 1099-MISC to one of their agents who represented themselves as Buyer's Agent on a purchase, and credited their entire commission as Buyer's Agent to themselves as the Buyer?
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Level 14

If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves

Yes.  The employing broker should include the agent's full commission in the agent's year-end 1099-MISC.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.**

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Returning Member

If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves

Very fortunate to find this Question/Answer since I have a similar situation that I'm hoping to get clarification on!
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
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Level 14

If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves

1.  Yes.  The rebate is regarded as a reduction in the purchase price of the home and is not taxable income to the buyer.
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.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.**

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Returning Member

If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves

Thanks TomD8!! You've been very helpful!!
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New Member

If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves

Hi Tom, 

 

The link to the IRS publication does not work, can you repost?

 

Thanks!

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Level 15

If a real estate agent is representing themselves as Buyer's Agent in the purchase of a property and credits/rebates their commission to themselves


@Agill10 wrote:

Hi Tom, 

 

The link to the IRS publication does not work, can you repost?

 

Thanks!


https://www.irs.gov/pub/irs-wd/0721013.pdf

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