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

Thu Oct 10 13:36:50 PDT 2019

Would it be correct to assume that any interest accrued and/or paid on 
the underlying "subject to" debt would be deductible as an interest 
expense (for an business/investor taxpayer)?

Kary L. Krismer
John L. Scott, Inc.
206 723-2148

On 10/10/2019 1:30 PM, Craig Gourley wrote:
>
> Basis is cash plus assumed debt plus improvements.  Gain or loss is 
> based on Selling price minus closing costs and minus basis.   The debt 
> is not relevant when it is paid off because it was accounted for at 
> the time the property was acquired.  For example paying off the loan 
> before you sell has no tax implication at all.  Same if it is paid off 
> at closing.   Give me a call if you have ancillary questions. Thanks, 
> Craig
>
> *Gourley Law Group*
>
> *Snohomish Escrow*
>
> *The Exchange Connection*
>
> **
>
> 1002 10^th Street / PO Box 1091
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> Snohomish, WA 98291
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> 360.568.5065
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> 360.568.8092  fax
>
> _Craig at glgmail.com <mailto:Craig at glgmail.com>_
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> *From:* wsbarp-bounces at lists.wsbarppt.com 
> <wsbarp-bounces at lists.wsbarppt.com> *On Behalf Of *Rod Harmon
> *Sent:* Thursday, October 10, 2019 12:12 PM
> *To:* WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> *Subject:* [WSBARP] purchase of encumbered real property - income tax 
> basis
>
> 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>
>
> *From:* wsbarp-bounces at lists.wsbarppt.com 
> <mailto:wsbarp-bounces at lists.wsbarppt.com> 
> [mailto:wsbarp-bounces at lists.wsbarppt.com] *On Behalf Of *Rick Hoss
> *Sent:* Thursday, October 10, 2019 9:32 AM
> *To:* 'WSBA Real Property Listserv' <wsbarp at lists.wsbarppt.com 
> <mailto:wsbarp at lists.wsbarppt.com>>
> *Subject:* Re: [WSBARP] Affirmative Defenses to Fraud and/or Negligent 
> Misrepresentation
>
> Hi Cat.
>
> In neg misrep, the plaintiff must prove justifiable reliance. If a 
> party to a contract is negligent to ascertain the truth of the other 
> party’s representations, that party’s own negligence is a complete 
> defense to the claim. See Condor Enterprises v. Boise Cascade, 71 
> Wash.App. 48, 53 (1993).
>
> Restatement (Second) of Torts, Sec. 552A;  ESCA Corp v. KPGM Peat 
> Marwick, 135 Wash.2d 820, 826 (1998).
>
> Rick
>
> *From:* wsbarp-bounces at lists.wsbarppt.com 
> <mailto:wsbarp-bounces at lists.wsbarppt.com> 
> <wsbarp-bounces at lists.wsbarppt.com 
> <mailto:wsbarp-bounces at lists.wsbarppt.com>> *On Behalf Of *Catherine Clark
> *Sent:* Wednesday, October 09, 2019 1:09 PM
> *To:* WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com 
> <mailto:wsbarp at lists.wsbarppt.com>>
> *Subject:* [WSBARP] Affirmative Defenses to Fraud and/or Negligent 
> Misrepresentation
>
> Has anyone faced an “assumption of the risk” and “contributory 
> negligence and/or comparative fault” affirmative defense when claiming 
> fraud/negligent misrepresentation around a real estate transaction?
>
> While I’ve been at this game “a while,” I haven’t seen that before.  
> Perhaps one of you has.  Your thoughts appreciated.
>
> Thanks.
>
> Catherine “Cat” Clark
>
> Law Office of Catherine C. Clark PLLC
>
> 2200 Sixth Avenue, Suite 1250
>
> Seattle, WA 98121
>
> Phone:  (206) 838-2528
>
> Cell:  (206) 409-8938
>
> Fax: (206) 374-3003
>
> Email: cat at loccc.com <mailto:cat at loccc.com>
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