To determine your tax cost for property, first find in the following section the unadjusted basis of the property, and then increase or decrease that basis (5.20).
Unadjusted basis is your cash cost plus the value of any property you gave to the seller. If you assumed a mortgage or bought property subject to a mortgage, the amount of the mortgage is part of your unadjusted basis.
Purchase expenses are included in your cost, such as commissions, title insurance, recording fees, survey costs, and transfer taxes.
If you buy real estate and reimburse the seller for property taxes he or she paid that cover the period after you took title, and you include the payment in your itemized deduction for real estate taxes (16.4), do not add the reimbursement to your basis. However, if you did not reimburse the seller, you must reduce your basis by the seller’s payment.
If at the closing you also paid property taxes attributable to the time the seller held the property, you add such taxes to basis.