If Dave buys a building for $20,000 and assumes a mortgage of $80,000, what is his total basis in the property?

The total basis in a property represents the total investment made in that property, which includes both the purchase price and any obligations that are assumed as part of the acquisition. In this case, Dave’s total basis consists of the amount he paid for the building and the mortgage he assumed.

Dave purchases the building for $20,000, which is the direct investment he makes in the property. Additionally, he assumes a mortgage of $80,000, which is a liability that he has accepted as part of the transaction. This mortgage increases his total financial commitment to the property.

To calculate the total basis, you simply add the purchase price to the assumed mortgage. Therefore, the total basis in the property is $20,000 (the purchase price) plus $80,000 (the assumed mortgage), resulting in a total basis of $100,000.

This understanding is essential for various aspects of real estate investment, such as calculating depreciation, determining gain on sale, or evaluating financing costs.