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

[Teague Pasco]

The basis includes the purchase price and the mortgage loan principal
amount.  See IRS Pub. 551.  The seller will generally recognize the assumed
loan amount as income, depending on its terms (recourse or not).

Teague Pasco JD, LLM
(360) 643-3990

On Thu, Oct 10, 2019, 12:22 PM Rod Harmon <rodharmon at msn.com> wrote:

> 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
>
>    rodharmon at msn.com
>
>
>
>
>
>
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