Federal Tax

Real Estate Mortgages (Portfolio 592)

  • The Portfolio, Real Estate Mortgages, analyzes the tax consequences of one of the basic financing tools in the field of real estate: the mortgage.


Bloomberg Tax Portfolio, Real Estate Mortgages, No. 592, analyzes the tax consequences of one of the basic financing tools in the field of real estate — the mortgage.

A real estate mortgage is a means of securing a debt instrument, generally of the taxpayer, with real property. As commonly used, the term “mortgage” refers not only to the mortgage itself but to the liability it secures. Thus, a real estate mortgage, as a liability, is generally subject to the rules governing liabilities.

A mortgage can establish basis in property for the mortgagor when it is used to acquire property or it can result in the receipt of tax-free cash to the mortgagor when it is obtained with respect to property already owned. This Portfolio explains the effects of a mortgage on property basis.

This Portfolio also explains the tax treatment of the costs of acquisition, placement, and servicing of a mortgage to both the mortgagor and the mortgagee and the effects of foreclosure of a mortgage on the mortgagor and mortgagee.

Additionally, this Portfolio discusses the tax consequences to the mortgagee, whether a provider of funds or credit or a purchaser of the mortgage debt from a prior mortgagee, upon the collection of the mortgage debt or the disposition of the mortgage.

Table of Contents

I. Introduction
II. Cost of Obtaining a Mortgage Loan
III. Tax Rules for Debt and Mortgage Instruments
IV. Establishing Basis
V. Income from Mortgages
VI. Losses from Mortgages
VII. Sale or Other Disposition of Mortgaged Property
VIII. Foreclosure of Mortgaged Property
IX. Real Estate Mortgage Investment Conduits

Robert Wood
Managing Partner
Wood LLP
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