Allocating Costs From Settlement Statement - Posted by Brink

Posted by Brink on July 05, 2003 at 19:30:49:

Frank, thanks for the excel sheet view. It is very helpful to see each cost broken out to its associated category. I’ve been using Quicken mostly for Sched E info. because I have only one property. QuickBooks might be a much better tool in the long run.

Allocating Costs From Settlement Statement - Posted by Brink

Posted by Brink on June 30, 2003 at 23:26:01:

I’m not sure if this is the approprate discussion forum for these tax related issues, if not, let me know…
how do most buyers account for… RESIDENTIAL RENTAL PROPERTY costs.

I have studied IRS Pubs 527-Residential Rental Property
551-Basis of Assets
535-Business Expenses
946-How to Depreciate Property

I’m trying to understand the methodology for allocating all
the various costs associated with the purchase of a 4 Plex
so every thing is correctly accounted when I sell.

What I think I understand is “some” costs are expensed,
“some” costs are depreciated through an increase in the
’cost basis’, “some” costs are amortized through ‘the life
of the loan’.

The problems arrise from cost of obtaining a loan; reserves
collected for insurance & property taxes, all which are
prorated (seller reimbursment); Title Policy charges
arrising from insurance premium for the loan amount vs. a
clear Title Policy fee.

EXAMPLE:
Contract Sales Price…200,000…CLOSING DATE…4/13/03

LOAN FEES
Loan Origin Fee…1%…150,000…1500
Loan Discount…%…-0-
Appraisal Fee…275
Credit Report…10 } ALL MUST BE AMORTIZED OVER LIFE OF LOAN
Tax Svc Fee…80
Underwriting Fee…100
Courier Fee…25
Doc Prep Legal…125

LENDER REQUIRED ADV
Interest from 4/14 to 5/1/03…600 } EXPENSE SCHED E MORT INT?

RESERVES DEPOSITED
Hazard Insurance…6mo…590 } EXPENSE SCHED E INSUR?
City Prop Tax…7mo…480 }
County Prop Tax…7mo…420 } EXPENSE SCHED E PROP TAX?
School ISD Tax…7mo…1400 }

TITLE CHARGE
Closing Fee…100 } COST BASIS-DEPRECIATE?
Lender’s Coverage…150,000…200 }???
Courier Fee…60 } COST BASIS-DEPRECIATE?

GOV RECORD/TRANSFER
Record Deed/Mort…30 } COST BASIS-DEPRECIATE?

ADDITIONAL FEE
Survey…300 } COST BASIS-DEPRECIATE?
Inspection…250 } COST BASIS-DEPRECIATE?

If there was just an example of the HUD Settlement Statement
and how each item is to dealt with…that would just be
to easy!

Re: Allocating Costs From Settlement Statement - Posted by Frank Chin

Posted by Frank Chin on July 05, 2003 at 06:15:41:

Hi Brink:

I got a Excel spreadsheet that answers all the above. that I’m e-mailing you separately. Its also used for Qucikbooks entry.

Let me know if you have further questions.

Frank Chin

Re: Allocating Costs From Settlement Statement - Posted by ray@lcorn

Posted by ray@lcorn on July 03, 2003 at 10:29:28:

Brink,

You’ll probably get a better response to these questions on the legal forum.

You might also want to take a look at John Hyre’s bookkeeping course. He goes into considerable detail about these very issues. It is available in the catalog section of the website, and the direct URL is
http://www.creonline.com/catalog/c-204.html

ray

Re: Allocating Costs From Settlement Statement - Posted by Dave M

Posted by Dave M on July 17, 2003 at 15:20:16:

Frank, could you possibly e-mail the spreadsheet to me as well? Thanks in advance.