Prepared by Worldwide ERC® Tax Counsel, Peter K. Scott
Peter Scott Associates
Current as of January, 2017
Closing Assistance Option
From time to time a situation may exist in which EMPLOYEE obtains a buyer for his/her home before being initiated into an employer’s relocation program or before an appraised value has been determined for the home. In such an event, EMPLOYEE usually has signed an agreement to sell the home to POTENTIAL BUYER and the only assistance being offered by PURCHASER is to pay EMPLOYEE his/her equity in the home and close the sale to POTENTIAL BUYER.
EMPLOYEE may sign a Contract of Sale to sell the home to PURCHASER and assign the agreement with POTENTIAL BUYER to PURCHASER to close. In some programs, EMPLOYEE is relieved of his/her obligations with respect to the home when the Contract of Sale between EMPLOYEE and PURCHASER is executed. If for some reason the closing with POTENTIAL BUYER does not occur, the home is processed as a regular (appraised value) transaction with EMPLOYEE being paid on the basis of the price in the agreement with POTENTIAL BUYER.
In other programs, EMPLOYEE may not be relieved of his/her obligations with respect to the home until the closing with POTENTIAL BUYER actually occurs. If for some reason the closing does not occur, the home is returned to EMPLOYEE for subsequent disposition by EMPLOYEE which may include going through the program as an appraised value transaction.
Such transactions are the equivalent of an assigned sale, and costs incurred by the employer are taxable to the employee.