lender and owner title insurance for rental property cost basis

Forum|Forum|5 years ago
March 14, 2021
1 reply
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When calculating the cost basis adjustments for a new property purchase, we can add the title insurance to the cost basis.

But it's not clear if we should add both Lender title insurance (ALTA loan policy) and the homeowner policy. Do both count towards cost basis? Both of them were paid and were included in the buyer side settlement costs for the purchase.

I am assuming we should add both because for one a) there is no clarity on the IRS instructions b) both were required and included in purchase, so it's a cost that was accrued to purchase property.

Carl11_2

Employee

The only costs you can claim, are those that you actually paid. They are shown on the HUD-1 closing statement under the "Paid from borrower's funds at settlement" column. If you didn't pay it, you can't claim you did.

aniljAuthor

There is no HUD document. I am seeing posts saying that this was deprecated.

Carl11_2

Employee

Lenders can use the HUD-1 settlement statement until their supplies of that form are exhausted. It's been a number of years, and I'm only aware of a few lenders/closing agents still using it.

With the so-called "new" form, there is no set format for anything. only 'Guidance". It's as if they can just "make up" their own form out of thin air. Absolutely ridiculous. You may want to get with your lender in person, and have them clarify and explain the form to you. If enough borrowers would actually do this, that might be incentive for lenders to make their closing statements clearer.