Tax consequences of assignable purchase contract

[Stuart Levine]

I have an assignable purchase contract for two houses as a package. I am sure I can sell one of them for enough to pay off the entire contract, at which point I will own the other house free and clear. My biggest question is when the contract is closed out, Do I report the second house,(valued at about $60,000), as income? Or, do I essentially have a zero basis in the second house, and will report a larger gain when it is,(eventually),sold? 

   I am an experienced investor, renovator, flipper, But have never come across the specific situation. Would really appreciate some tax advice here,Or a referral  to someone who might be able to answer my questions. 

Thanks in advance, Stuart at Zombiehouse restoration 

[Natalie Kolodij]

Originally posted by @Stuart Levine:

I have an assignable purchase contract for two houses as a package. I am sure I can sell one of them for enough to pay off the entire contract, at which point I will own the other house free and clear. My biggest question is when the contract is closed out, Do I report the second house,(valued at about $60,000), as income? Or, do I essentially have a zero basis in the second house, and will report a larger gain when it is,(eventually),sold? 

   I am an experienced investor, renovator, flipper, But have never come across the specific situation. Would really appreciate some tax advice here,Or a referral  to someone who might be able to answer my questions. 

Thanks in advance, Stuart at Zombiehouse restoration 

 If I understand correctly you're buying 2 houses as a package from a whoelsaler?

Then you're going to keep 1 and re-sell 1?

You'll allocate the purchase price you paid for the package between the 2 houses based on a reasonable allocation (tax assessor values for each applied as a %) 

Then when you re-sell the one that will be your basis your gain is applied based on.