@crdixonaz wrote:
Thank you, yes the 113k is proceeds as the title company is calling it. I understand now that the pay off and what we take home is not relevant. Do you know if seller concessions can be deducted at all as we paid about 14k in addition to the realtor commissions and other closing costs. Its about 41k all together.
Adjustments to basis are described in publication 523 on page 8.
https://www.irs.gov/pub/irs-pdf/p523.pdf
Briefly, you can subtract fees and legal costs as long as they have nothing to do with financing (in other words, whatever fees you would pay if you were selling for cash and had no mortgage–so if there is a legal fee for recording the mortgage as closed, that is not allowed).
Most "seller concessions" are treated as a reduction in the selling price. If the list price is $459,000 but you agree to pay $10,000 of the buyer's closing costs, then the sales price is really $449,000. Calling it $459,000 is a bit of real estate trickery to keep market prices higher and get the agent a bigger commission. Other costs like the agent commission are allowed as adjustments to the selling price.
