All Topics / Legal & Accounting / Accounting for an option fee ?

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  • Profile photo of McHenryMcHenry
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    @mchenry
    Join Date: 2005
    Post Count: 45
    July 6, 2006 - 11:43 pm

    If a property is sold using a 10 year option and an option fee is paid on day one how is that option fee to be classified for taxation purposes ?

    Taxable income in year 1 ?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    July 8, 2006 - 4:50 am

    I beleive option fees are taxed as capital gains in the year of receipt.

    Terryw
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    Profile photo of XeniaXenia
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    @xenia
    Join Date: 2002
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    July 8, 2006 - 1:27 pm

    The way we have done it, option considerations (if applied to the purchase price at the end) are TAX DEFERED!!!

    That means that they are taxed as capital gains if the option is exercised or as income if the option is not exercised and the consideration is non-refundable.

    Xenia Ioannou-Mena
    Property Manager &
    Property Sales Consultant
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    M. 0412 437 582

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