Property Manager · Member since 2011 · 18 posts · 0 votes
I am trying to calculate my building basis for tax purposes.
Can I add the items under the heading "Adjustments for items unpaid by seller" on my HUD statement? Specifically, "County taxes" on line numbers 211? This was just a reducton to my loan, so Im not sure If I should add this to my basis.
I know I can add closing costs such as the title charges, recording charges, and transfer charges to my basis, but Im not sure if I can add the adjustments to my basis.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
14y
I treated taxes paid as a seperate deduction from income. Your closing costs of settlement are amortized. Points and loan costs are considered loan expensepre and paid interest to the loan. Property inspections go to the property acquisition costs. Basically you should have either taxes, loan expenses and property acquisition expenses and costs are amortized or deducted as allocated. I'm not a tax guy and we have some good ones here, but that's how I do it.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
14y
How it was explained to me is: Taxes and some utilities get pro-rated. If you pay a seller's portion of that pro-rationing, then that amount becomes part of your basis. The part that is for the period of your ownership becomes an expense. But normally, the HUD1 will make adjustments to buyer's amount being paid AND seller's amount to be received to account for pro-rated amounts being placed upon the party for periods where they did not have ownership.
I am not an accountant or tax preparer - that is simply my recollection of how these matters were explained to me. My CPA gets to do the determination of whether it goes in as expense or added to basis.