Kind of a nebulous question, but here goes: On schedule E, under rents received, I'll put all amounts that I actually received for rent, but do I add amounts on the settlement statement listed as "reductions in amount due to seller" under "prorated rents"? Also, do I count Deposits? Thank you
When you sell your rental property with a tenant in place, you prorate the current month’s rent between you and the buyer from the settlement date to the end of the month.
Since you collected the full monthly rent at the beginning of the month, and gave the buyer some of that rent as part of your prorated settlement, your Schedule E will show all rents received minus the prorated rent you gave to the buyer.
Deposits are not rent and are not yours to keep. Deposits belong to the tenant until they are forfeited. If you sold the property with a tenant in place, the tenant’s deposit should have transferred to the buyer. The tenant’s security deposit should have been a further “reduction in amount due seller” on your HUD-1.
If it was not, then you should send the buyer a certified check for the rental deposit. Send the check certified mail with return receipt required.
Thank you for your reply. I am the buyer in the described transaction, and the seller did credit both the prorated rents and prepaid deposits. #1 So my Schedule E will show all rents received plus the prorated rents that the seller gave to me, right? #2 Further, I do not claim prepaid deposits as rents received. Is that true? Thanks again,
Yes to both questions.