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

Thu Oct 10 14:17:47 PDT 2019

Depends, construction period interest and taxes are supposed to be capitalized. If it is a rental type property then yes they are expensed and deducted.  Most people are cash basis tax payers so "accrued" but unpaid interest would not be deductable to most people.

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________________________________
From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> on behalf of Kary Krismer <Krismer at comcast.net>
Sent: Thursday, October 10, 2019 1:36:50 PM
To: wsbarp at lists.wsbarppt.com <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] purchase of encumbered real property - income tax basis

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 10th Street / PO Box 1091
Snohomish, WA 98291

360.568.5065
360.568.8092  fax
Craig at glgmail.com<mailto:Craig at glgmail.com>

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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 Rod Harmon
Sent: Thursday, October 10, 2019 12:12 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com><mailto: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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