If I buy a foreclosure that cost 1,000,000 but the FMV is 1,500,000 then what is the journal entry to show the $500,000? I know it is an equity account but I am not sure how to title it on the balance sheet.

ANSWER

Expert Thomas Graham iii's Answer:

The only amount recorded on the books initially will be the cost basis in the property which is $1,000,000 this is also going to be your tax basis in the asset right away. Cost basis is going to be the norm for business purchases of real property. Please see IRS Publication 551 for more information.

Thomas Graham iii, CPA, CFE

Oklahoma

7 yrs experience

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78 Ans.