2-Jul-2019 8:57pm
11-Jul-2019 3:14pm
12-Jul-2019 7:21am
the home builder agrees to purchase a certain # of lots each quarter
12-Jul-2019 7:46am
12-Jul-2019 8:00am
12-Jul-2019 8:03am
12-Jul-2019 8:10am
12-Jul-2019 9:14am
It seems to me the big firm is taking this position of portfolio income because they think it is correct
In that case, the option fee was paid in exchange of a right to purchase which could be freely exercised or not by the purchasing party. In your case, it sounds like the purchase has been contractually agreed to and the option fee is nonrefundable.
12-Jul-2019 11:25am
Jeff-Ohio wrote:As to your second sentence, that’s kind of what I was getting at with my Post #3. But Post #5 seems to reveal that it’s a true option arrangement.
But if it really is a “contractually agreed to” purchase, wouldn’t this lend itself towards the underlying “obligation” being treated as debt, with any payment made by buyer to seller prior to the exercise (or lapse) of the option being for the forbearance of money (as opposed to allowance for lot price appreciation)?
But if we are saying Koch is distinguishable, because the purchase was contractually agreed to in OP’s case but not in Koch’s case, wouldn’t that imply that the option money in OP’s case isn’t consideration for the property itself, like in Koch, but instead, is for the forbearance of money?
12-Jul-2019 1:43pm
If you want to book a credit the buyer's liabilities, then where does the debit go?
12-Jul-2019 1:59pm
12-Jul-2019 3:06pm
Taking the whole thing and throwing it into interest income just sounds like something a lazy junior accountant who saw the term "Land Bank" would do.
But to your point, I don't think there's a valid reason for Big Firm's tax treatment under either scenario.
If there is no such right, then my proposition fails and OP's facts are in line with Koch.
13-Jul-2019 6:24am
essentially the fund acting as the lender for land investments
"Option Fee" on the capital balance outstanding (12 - 15%),
13-Jul-2019 6:48am
13-Jul-2019 9:17am
If I enter into a contract to buy your car from you a year from now, but in the meantime you have full rights to the use and enjoyment of the car, do you need to recognize some of the sales proceeds as interest income a year from now?
13-Jul-2019 10:13am
TPAtaxCPA wrote:It is a little different because the land is actually never sold at a gain
13-Jul-2019 2:26pm
13-Jul-2019 2:52pm
Dennis2 wrote:And this convolution is substantially economically different than a non recourse loan with prepaid interest and an irregular payment schedule?
13-Jul-2019 4:16pm
13-Jul-2019 8:03pm