Seller Credit v Price Reduction -- Differences - Cap gains v prop

[Will F.]

Hi I was thinking of whether I wanted to receive Credits vs a Price reduction for a property I'm purchasing in Long Beach, CA.

As far as prop 13 benefits (for locking in Califonia property taxes) I could see a benefit for a price reduction.

vs

A credit could be beneficial for a higher tax basis so you wouldn't have to pay as much capital gains if you sold later. 

ie: 

CREDIT $1M price with a 100k seller credit to buyer (pay more property tax but less cap gains tax if resold later) vs 

PRICE REDUCTION 900k price (lower property tax vs higher cap gains tax when sold later due to a lower tax basis?). 

I would assume if you are going to buy and hold and 1031 exchange forever the strategy would be to get a price reduction.  If you were going to ad-value/resell soon then it could be better to credit.

Is that correct? What do you all think?

(FYI prop 13 locks in your property taxes at around 1.25% close to your sales price and capital gains taxes are about 25% in California)

[Wayne Brooks]

Well, you phrased it backwards in your example, but as far as cap gains would be concerned (which wouldn't apply to your primary residence, up to $250-500k), the result would be the same, as your basis would be $900k in either case.  $1m with $100k given back to you is the same as $900k.