I believe TaxGuyBill is correct. Any "sellers credit" is treated like a reduction in the sales price and therefore, goes to the depreciation basis. You still get credit for all the closing costs that are deductible. In other words, if the contract was for $100,000, and there were $10,000 of closing costs and a $5000 seller credit, you treat the transaction as if the sales price was $95,000 and you paid all the closing costs.
Obviously the usual rules still apply. You can only deduct property taxes for the dates you owned the property, even if the closing costs included back taxes that the seller owed. And any closing costs that aren't deductible are added to the basis. So instead of having a $110,000 basis and then worrying about how to allocate the $5000 sellers credit, you just have a $105,000 basis (more or less).
