Multi-family Investor · St. Charles, MN · Member since 2013 · 5 posts · 0 votes
Our inspection report indicated a few suggested fixes. We asked the seller to compete the fixes as part of our contingency agreement and they offered to just give us cash back at closing to cover the costs. We agreed received the cash back. How do I account for this come tax time? Is this taken out of the cost basis of the purchase?
You should reduce your basis in the property by the cash back amount.
If you use the cash to make the necessary repairs, depending on the size and scope, these additional repairs will be added to your basis and depreciated, or expensed in the year the repairs are performed.