Land Sale

[kpl]

I agreed to sell a parcel of land to a relative in 2020.  I was paid in advance of the closing by my relative in 2020 but the actual closing was delayed until 2021.  Should this sale be included in my 2020 or 2021 tax return?

[Anonymous_]

If the agreement was made in 2020 and you received payment, then you should report the transaction on your 2020 individual income tax return. 

Closings (signing documents, recording deeds, et al) are typically just mere formalities if the terms of the contracts have essentially already been completed.

[RayW7 · Accepted solution]

Regarding the Real Estate transition.-

Nothing gets reported until the transaction closes and the title is transferred. You will received a HUD 1 on the closing date with closing amounts. This may be reported to the IRS with a 1099-S.

So even if you receive a good faith earnest payment in 2020, if the property does not close until 2021 you will not report anything until you file your 2021 return.

[Anonymous_]

With respect to the answer by @RayW7, he has a valid point concerning the tax reporting statement (1099-S).

If you will not receive the 1099-S until the 2021 tax year, then you should report the transaction in 2021 and not 2020, despite the fact that the contract appears to be fully executed and not executory.