Basis when purchasing subject-to
@Steven Hamilton II and @Dmitriy Fomichenko
I read some threads recently where the info on basis when purchasing sub2 seemed conflicting. 2 years ago I bought a property subject-to the existing liens of $250K. Then four months later negotiated a payoff on the liens (as the owner, so not a short sale) for $80K. I rehabbed it and sold it a few months later for $165K. I treated it as inventory on my Schedule C that year.
If I had kept the property for longer, what would the basis be? I've read the purchase price plus any debt should be the basis, so in this case $251K. But that seems like such a windfall, as I would have a reportable loss when that property was totally profitable. Since the debt wasn't mine, I didn't receive a 1099 on the forgiveness.
Is that just a perk of sub2 purchase?