cash for keys split

[thebrain]

What is the name of your state (only U.S. law)? CA
I was renting a condo with my girl friend(ex girl friend now). The land lord didn't pay the mortgage and we were evicted. The bank gave us 3500 dollars to leave the condo. She was in this country on a student visa and didn't have a social security number. So the bank gave me the money and i split it with her.

Now the bank has sent me a 1099 for 3500. Is there any way I can write off the 1750 i gave my ex? I have utility bills with her name on them and magazines that were delivered to the condo with her name on them, to prove we lived together, plus i have a copy of the check i gave her for 1750, would that be sufficent evidence to convince the irs that i should only pay taxes on 1750?

 

[sandyclaus]

What is the name of your state (only U.S. law)? CA
I was renting a condo with my girl friend(ex girl friend now). The land lord didn't pay the mortgage and we were evicted. The bank gave us 3500 dollars to leave the condo. She was in this country on a student visa and didn't have a social security number. So the bank gave me the money and i split it with her.

Now the bank has sent me a 1099 for 3500. Is there any way I can write off the 1750 i gave my ex? I have utility bills with her name on them and magazines that were delivered to the condo with her name on them, to prove we lived together, plus i have a copy of the check i gave her for 1750, would that be sufficent evidence to convince the irs that i should only pay taxes on 1750?

Nope. You got the whole thing, so you are the only one liable for the taxes.

What you did with the money once you received it is your business, but you can't make the IRS charge you taxes on only 1/2 because you didn't receive 1/2, you received ALL of it.

 

[tranquility]

While we say things like "cash for keys" and assume it always means the same thing, that's not always the case. How things are handled depend on the exact facts.

If there was a true leasehold, some would say there is a capital gain for the amount, while others might say it is just other income not subject to social security. (Don't forget about security and other deposits. I assume they're gone and that could be a non-business bad debt--depending on the amount.)

If both were on the lease, then both probably gave something up for the money and should treat things accordingly. Think "nominee". How to report it on the return depends on the facts, but the OP should be able to reduce his income by 1/2 of the amount if the girlfriend had rights to the money. Just attach a statement to the back of your return if you'd like. You may get a letter audit for the mismatch, but it shouldn't be that difficult to answer--if you can prove up girlfriend's rights to the money. If all you have is that you gave someone half, then I'd have to agree with sandyclaus.

 

[thebrain]

While we say things like "cash for keys" and assume it always means the same thing, that's not always the case. How things are handled depend on the exact facts.

If there was a true leasehold, some would say there is a capital gain for the amount, while others might say it is just other income not subject to social security. (Don't forget about security and other deposits. I assume they're gone and that could be a non-business bad debt--depending on the amount.)

If both were on the lease, then both probably gave something up for the money and should treat things accordingly. Think "nominee". How to report it on the return depends on the facts, but the OP should be able to reduce his income by 1/2 of the amount if the girlfriend had rights to the money. Just attach a statement to the back of your return if you'd like. You may get a letter audit for the mismatch, but it shouldn't be that difficult to answer--if you can prove up girlfriend's rights to the money. If all you have is that you gave someone half, then I'd have to agree with sandyclaus.

How could I prove her right to the money?

 

[tranquility]

How could I prove her right to the money?

One way would be:

If both were on the lease,

 

[thebrain]

it was month to month, there was no lease, however i do have the checks she gave me for her half of the rent. I cashed them and then wrote the lard lord a check for the rent

 

[justalayman]

it was month to month, there was no lease, however i do have the checks she gave me for her half of the rent. I cashed them and then wrote the lard lord a check for the rent

a month to month tenancy is still a leasehold.

was there any written lease/rental agreement? If so, who signed as tenant(s). If both, then she was entitled to the money as well as yourself.


A question to tranquility:

in a cash for keys situation, one does not necessarily have to be a lessee in order to be offered and receive money to vacate without argument. Any resident of a property could actually decide to stay and require an eviction, even if they were not the legal lessee. As such, any cash for keys payment is generally contingent on all parties leaving the premises voluntarily and as such, would tend to make all parties equally due any cash for keys money.

Does that alter your position on whom was due money? and if so, how would OP address the IRS to explain such a situation?

 

[tranquility]

The IRS is going to have a mismatch between what is reported to them and what you reported on your return. They will send a letter to you asking to explain that. If you think the facts you have will explain that, you are good to go. I might paper it over with a 1099 issued to the ex, but that is not determinative in this case as it's not the usual nominee situation.

As to the check for everyone to leave, I addressed the issue earlier:

While we say things like "cash for keys" and assume it always means the same thing, that's not always the case. How things are handled depend on the exact facts.

Here they apparently issued the check to the OP and not to "everyone". I don't disagree with justalayman, it's just that there are many variations of facts possible.

 

[justalayman]

As to the check for everyone to leave, I addressed the issue earlier:
Here they apparently issued the check to the OP and not to "everyone". I don't disagree with justalayman, it's just that there are many variations of facts possible.

Not trying to belabor the discussion but if the OP was the only legal tenant, it would have been quite possible they would issue the check in his name only but that would not negate the claim the GF had on the money as a resident IF (and I have not seen a situation where it isn't so) the money was tendered with the requirement that all occupants leave without argument.

Basically, in such a situation, if the GF refused to leave, the OP would not have been paid the cash for keys. As such, GF had an equitable claim on the cash since she was a de facto party to the contract. Essentially a 3rd party beneficiary to a contract.

 

[tranquility]

If those are the facts, once the OP proved them up (where the girlfriend was a third party beneficiary) I'd say there isn't a problem.

 

[thebrain]

The lease was verbal, the only evidence that we stayed there are the canceled checks. I don't really understand the 3rd party aspect of this? Also what was ment with papering over with a 1099? She didn't have a social security number, so how could i issue her a 1099?

 

[tranquility]

Pay the taxes on the money. The more you write, the less likely it is you can prove she was a nominee.

You will get a letter for the mismatch. You will have to prove up the facts for how you treat things. I don't think you can and you don't want the penalties and interest added to the money.