Expert: Ed McFarland - 11/14/2006

Question
We put down a deposit on two condos(pre-construction) two years ago and the condos are about to be completed now. Since the Real Estate market is horrible, we are considering walking away from the properties and the deposits.

The question is, "Are these deposits that we are going forgo, tax deductible?"

Answer
You need to check with your tax man, but I would say that your intention was for investment this would be a capital loss.

Capital losses offset capital gains dollar for dollar, but you can only use $3,000 per year (every year until you exhaust it)to offset ordinary income.