Repair Escrow

[rcarmarkcpa]

How does a repair escrow the seller set's up treated on the sale?  It reduces his proceeds. Is it taxable before the seller receives it.

                                                                                                          Thanks

[qbteachmt]

You can google:

what is repair escrow

"Escrow" means money is set aside held by a third party, so that the two parties with interest in the funds must agree on the amount(s) and disbursements.

"Repair" means to fix something.

So, the buyer agreed for the seller not to be paid in full, and the amount set aside is to be used for repairs on the property being transferred. Example: they tried to install a new AC before Fall, but it didn't go well, so that amount is set aside at closing, to be signed off on and collected by the builder, once they agree that the AC is in and working.