Bookkeeping Treatment of Postposession Holdback

[Doug Lovett]

I do bookkeeping for real estate investors and have a client that bought a house where the seller needed post possesion.  They did an escrow holdback at the title company.  The seller didn't move out in the allotted time and forfeited the escrow holdback, which the title company sent to my client.

What is the best way to treat this: 1) other income or 2) a price concession on the purchase price?

@Michael Plaks what's your take?

[Michael Plaks]

The best way to treat it, you ask? Not a doctor, but I'd leave it untreated, it should heal on its own.

I don't think there's a clearly prescribed (pun intended) answer. Personally, I would trea..., err, consider it current income. Post closing, your client became the owner, and the seller remained on the property essentially as a tenant. Presumably subject to eviction. I think the payment your client received is an equivalent of rent.

Interesting to hear what my colleagues think, particularly since trea..., err, recording it as a price concession is slightly more beneficial tax-wise.