dontspamthecat[at]boo.ya (Mike) posted:

- quote -

In fact, your closing costs at both ends of the deal are
_properly_ added to your cost basis, rather than reducing
the amount of income ... so your plan is not only
practicable, but the right thing to do.

That oughta' make your day.

Bill

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"Mike"
<dontspamthecat[at]boo.ya> wrote:

- quote -

Well not all of your original ( in fact most) closing costs are not
capitalized. Anything related to obtaining the mortgage is not basis. As
to you paying HIS closing costs, I WOULD consider those to be costs of
selling.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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I purchased my home in 1997 for 186K. I'm doing a FSBO and
have a potential buyer. We have agreed that 438K is a
workable price, however since his liquid position is tight,
he wants me to pay his closing costs.

We were bantering about the idea of adding 8K to the price,
bring it up to 446K, and then I would pay up to 8K of his
closing costs, thus bringing my net back to 438K. Now my
profit on the house would be 260K, and since I am single I
would now be over the 250K tax-free limit.

Am I allowed to add the 8K that I pay for his closing costs
to my basis, as well as my closing costs for the sale, and
my original closing costs when I first purchased the
property? Doing so would pull me back under the 250K limit,
and thus relieve me of paying taxes.

Thanks,

-Mike

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