Acquired Rental Property

[Possi]

My new client acquired a rental property for the low low blue-light special price of $14,243.00. He is taking over payments, so all he paid up front was settlement cost, finder's fee, and something else that totaled the 14,243.


The balance on the loan is 80,056.

So, is the basis 94,299?

Thanks!

HAPPY VALENTINE'S DAY!

[taxxcpa]

If he is taking over the payments, the principal balance of the payments should be added to the down payment to get the total basis. In this case, I'm not sure what to do if the land is worth more than the total basis, but I believe you could take the appraised value of the land and the appraised value of the other assets and apply the same ratio to the cost basis.
For example:
Appraised land value $150,000
Appraised other asset value $ 200,000
Total Appraised Value $ 350,000

Cost of the whole works = $280,000
150/350 X $280,000 = Land Basis $ 120,000
200/350 X $280,000 = Other Assets basis $ 160,000

[Possi]

Thanks

That sounds reasonable. Thanks for your help!

[appelman]

Am I missing something?

I don't see how his basis can be greater than 94,299, regardless of what any appraisal says.

[Possi]

Example

I don't see how his basis can be greater than 94,299, regardless of what any appraisal says.

Yes, you are right. That was just an example of how to compute the land value if I need to do that.

94,299 it is...

[taxmom34]

this property was bought, it was not inherited. so his cost is his basis, the principal amount on loan and his closing cost total= $94,299

[taxea]

isn't his basis is the fmv or his costs whichever is less?

[Burke]

For depreciation, yes. For resale, no.