Question

What gets added to the cost basis?

Forum|Forum|4 years ago
August 15, 2021
2 replies
0 views

I am determining the cost basis of a rental property that was purchased at an auction.

Do fees such as outstanding association dues/liens from the previous owner get added as an expense or added to the cost basis?

It doesn't seem like it from this site - https://www.realized1031.com/blog/what-types-of-costs-can-be-included-in-the-initial-cost-basis.

Not A Product Question

Carl11_2

Employee

Yes, it all gets added to the cost basis. Even in the link you reference, it clearly states, "Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions."

Carl11_2

Employee

The general rules as they apply if you had purchased the property with a loan are:

- Costs associated with the acquisition of the property are added to the cost basis of the property. An example would include the title transfer fees paid at the courthouse to remove the seller's name from the deed, and replace it with the buyer's name.

-Cost associated with acquisition of the loan are amortized and deducted (not depreciated) over the life of the loan. An example of this would include loan application costs and survey costs if the lender required a survey as a condition of approving the loan.