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Lender credit in closing

Technical topics regarding tax preparation.
#1
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Suppose I have the following charges / credit in closing of the original purchase of home (simplified for clarity):

- Purchase price: 150,000
- Origination fee: 1000
- Government fee: 2000
- Lender credit (non earmarked): -2500

What is the cost basis of the property? What I can deduct? Thanks.
 

#2
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Unfortunately, simplifying in this situation hurts rather than helps. There is nuance.

For example, how is the property used? State and local government transfer taxes may be deductible if it's used in a trade or business. They might be capitalized in other situations. See Rev. Rul. 65-313.

Government recording charges are capitalizable into basis.

High level, you'll want to break it would into items capitalized into the basis of the property, loan costs, and expenses. And again, how the property is going to be used matters.
 

#3
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ManVsTax wrote:Unfortunately, simplifying in this situation hurts rather than helps. There is nuance.


Thanks Man. This is the initial purchase of primary home. My question is whether the lender credit reduces the cost basis, and the taxpayer can still claim the points, or the lender credit offsets the points.
 


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