OP hopes tp find some way to depreciate the remediation costs, or at least some of them. Applying OP's facts to my assumptions, what happens to basis allocation here?
Buyer's expectation
Total value of land and building after remediation will be 1200, allocable 300 to land, 900 to building
Purchase price 1000, with no allocation specified between land and building
Expected cost of remediation of land 200
Thus, allocation would have been 300 to land and 900 to building
Actual
Remediation cost of land turns out to be 600
So total basis will be 1600
But value is still only 1200 (because buyer overpaid)
Allocation
Value of land 300, value of building 900. so 25% of 1600 to land and 75% of 1600 to building
Land 400, building 1200
Voila!. We've added 300 of the extra 400 remediation costs to the building.
Rationale
Had we known what the real remediation cost would be, we'd have paid only 600 total for the property
The land's actual value would have been -300
The building's actual value is (still) 900
We'd allocate all the remediation costs to land, for a total cost basis of 300
Is there authority for such an approach? Had the seller paid the extra 400 remediation costs (which we made him do by lowering the purchase price by 400), he'd have a lower gain or higher loss by that much, and we'd have paid 1200 as described above - 300 and 900.