[WSBARP] purchase of encumbered real property - income tax basis

[Rod Harmon]

This is one of those tax questions I ought to know the answer to, but I don't.
House-flipping client buys real property, paying the seller cash and taking the property encumbered by a mortgage.  What is his basis for income tax purposes?
Cash paid to seller plus balance due on mortgage at time of purchase?
Cash paid to seller?
If the latter, how does client account for the mortgage when he pays it off upon sale?

Rod Harmon

RODNEY T. HARMON
       Attorney at Law
         P.O. Box 1066
      Bothell, WA   98041
     Tel:   (425) 402-7800
     Fax:  (425) 458-9096
    www.rodharmon.com<http://www.rodharmon.com>
   rodharmon at msn.com<mailto:rodharmon at msn.com>



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