<div dir="auto">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).<br><br><div data-smartmail="gmail_signature">Teague Pasco JD, LLM<br>(360) 643-3990</div></div><br><div class="gmail_quote"><div dir="ltr" class="gmail_attr">On Thu, Oct 10, 2019, 12:22 PM Rod Harmon <<a href="mailto:rodharmon@msn.com">rodharmon@msn.com</a>> wrote:<br></div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex">





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<p class="MsoNormal"><font size="2" face="Calibri"><span style="font-size:11.0pt">This is one of those tax questions I ought to know the answer to, but I don’t. 
<u></u><u></u></span></font></p>
<p class="MsoNormal"><font size="2" face="Calibri"><span style="font-size:11.0pt">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? 
<u></u><u></u></span></font></p>
<p class="MsoNormal"><font size="2" face="Calibri"><span style="font-size:11.0pt">Cash paid to seller plus balance due on mortgage at time of purchase?<u></u><u></u></span></font></p>
<p class="MsoNormal"><font size="2" face="Calibri"><span style="font-size:11.0pt">Cash paid to seller? 
<u></u><u></u></span></font></p>
<p class="MsoNormal"><font size="2" face="Calibri"><span style="font-size:11.0pt">If the latter, how does client account for the mortgage when he pays it off upon sale?<u></u><u></u></span></font></p>
<p class="MsoNormal"><font size="2" face="Calibri"><span style="font-size:11.0pt"><u></u> <u></u></span></font></p>
<p class="MsoNormal"><font size="4" color="#1f497d" face="Arial"><span style="font-size:13.0pt;font-family:"Arial",sans-serif;color:#1f497d">Rod Harmon</span></font><u></u><u></u></p>
<p class="MsoNormal"><b><font size="4" color="#1f497d" face="Arial"><span style="font-size:13.0pt;font-family:"Arial",sans-serif;color:#1f497d;font-weight:bold"> </span></font></b><u></u><u></u></p>
<p class="MsoNormal"><b><font size="4" color="#1f497d" face="Arial"><span style="font-size:13.0pt;font-family:"Arial",sans-serif;color:#1f497d;font-weight:bold">RODNEY T. HARMON</span></font></b><u></u><u></u></p>
<p class="MsoNormal"><b><font size="2" color="#1f497d" face="Arial"><span style="font-size:11.0pt;font-family:"Arial",sans-serif;color:#1f497d;font-weight:bold">       Attorney at Law</span></font></b><u></u><u></u></p>
<p class="MsoNormal"><font size="2" color="#1f497d" face="Arial"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:#1f497d">         P.O. Box 1066</span></font><u></u><u></u></p>
<p class="MsoNormal"><font size="2" color="#1f497d" face="Arial"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:#1f497d">      Bothell, WA   98041</span></font><u></u><u></u></p>
<p class="MsoNormal"><font size="2" color="#1f497d" face="Arial"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:#1f497d">     Tel:   (425) 402-7800</span></font><u></u><u></u></p>
<p class="MsoNormal"><font size="2" color="#1f497d" face="Arial"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:#1f497d">     Fax:  (425) 458-9096</span></font><u></u><u></u></p>
<p class="MsoNormal"><font size="2" color="#1f497d" face="Arial"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:#1f497d">    <a href="http://www.rodharmon.com" target="_blank" rel="noreferrer">www.rodharmon.com</a></span></font><u></u><u></u></p>
<p class="MsoNormal"><font size="2" color="#1f497d" face="Arial"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:#1f497d">   <a href="mailto:rodharmon@msn.com" target="_blank" rel="noreferrer">rodharmon@msn.com</a></span></font><u></u><u></u></p>
<p class="MsoNormal" style="margin-top:6.0pt"><font size="2" face="Calibri"><span style="font-size:11.0pt"><u></u> <u></u></span></font></p>
<p class="MsoNormal"><font size="2" face="Calibri"><span style="font-size:11.0pt"><u></u> <u></u></span></font></p>
<p class="MsoNormal"><font size="2" face="Calibri"><span style="font-size:11.0pt"><u></u> <u></u></span></font></p>
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