Skip to content
Tax, SDIRAs & Cost Segregation
Account Closed
  • Investor
  • Central Valley, CA
3,724
Votes |
6,037
Posts

Basis when purchasing subject-to

Account Closed
  • Investor
  • Central Valley, CA
Posted May 2 2015, 10:00

@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?  

Loading replies...