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Posted by Sam on March 13, 2001 at 00:42:21:

In Reply to: Money to Vacate posted by Sue on March 12, 2001 at 13:48:46:

: I am a rent-controlled tenant in a 6-unit building in Manhattan.The new landlord has been negotiating vacate agreements with cash buyouts & we are now down to 2 occupied apartments. Does anyone know if the cash buyout is considered ordinary income or capital gains? At what rate would it be taxed? Also if a lawyer negotiates the settlement, are his fees tax deductible since they resulted in taxable income?

Capital Gains because the leasehold is considered to be an asset. There are some cases in the pipeline to try to get the same tax deferral on the gains that people selling houses or coops get but as of tax year 2000, this is a long-term capital gain. The lawyers fee and other expenses directly relating to acquiring this money should be deductible, suggest you use an accountant this year.

Big Hint: do not hire any accountant or attorney who does not answer this question correctly immediately...

Reference: IRS Code Sec 1241, 1231, 1221.

Follow Ups:

• Re: Money to Vacate is capital gains Sue 03/13/01 (0)

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: : I am a rent-controlled tenant in a 6-unit building in Manhattan.The new landlord has been negotiating vacate agreements with cash buyouts & we are now down to 2 occupied apartments. Does anyone know if the cash buyout is considered ordinary income or capital gains? At what rate would it be taxed? Also if a lawyer negotiates the settlement, are his fees tax deductible since they resulted in taxable income?

: Capital Gains because the leasehold is considered to be an asset.  There are some cases in the pipeline to try to get the same tax deferral on the gains that people selling houses or coops get but as of tax year 2000, this is a long-term capital gain.  The lawyers fee and other expenses directly relating to acquiring this money should be deductible, suggest you use an accountant this year.  

: Big Hint: do not hire any accountant or attorney who does not answer this question correctly immediately...

: Reference: IRS Code Sec 1241, 1231, 1221.


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