I'm not sure I understand the question.
Who sold the home?
Are you saying that the Buyer had a loan from the Seller, then took a second loan and then what? Bought the house from the original Seller and paid off those two loans?
So if the Seller originally purchased a house for 100,000 and gave the Buyer a 200,000 loan, then gave the Buyer a 25,000 loan for repairs and then the Buyer pays off the loans and gets the house free and clear, the Seller sold the home for 200,000.
No, the amount of the repair loan was not part of the purchase between the Seller and Buyer. It was an additional loan made after the fact.
The Seller would claim Capital Gain on the originally agreed sales price, in the example 200,000.
The Seller would claim the interest on both loans as income.
The basis for the Buyer would be 225,000 if the 25,000 was used for improvements. If the 25,000 was just repairs and maintenance, the Buyer's basis would only be 200,000.
If I am not understanding, please continue the question.
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