Increase in basis? (scenario)

[ILLMAS]

Let's TP A co-bought a property with friend B back in 2005 as an investment property, A has been reporting 100% of rents, expenses, depreciation...etc since day one.  In 2009 they have a fallout and A would like to keep the property and buyout B, property was bought for $500K and appraised for for $800K in 2009, A refinanced the property and paid B $250K half of the original cost and $150K half of the appraised value totaling $400K, A was on the hook for the $800K loan, my question is, would TP A basis increase by $300K for the additional cost to him?  

Thanks

MAS

[Gail in Virginia]

Not sure where $300K comes from.  Basis was $250K apiece; paid partner $400 for his share; looks like increase in basis of $400 so that TP now has $650 invested in property.  This ignores any changes to basis due to reporting depreciation since don't have figures on that.    What have I missed?

[ILLMAS]

$150K is correct, it should be half of the $300K.  As for the basis of the property as of 2015 is $380K (500-120 A/D=380), the problem is that the additional $150K in basis was never recognized and the property was sold in 2015, unfortunately everything was done on a shake hand deal and now the TP has a gain of about $120K and recognizing the $150K would help him out.  Any suggestion on how to handle the $150K now?  The refinance happened in 2009 and we are working on 2015 return.

Thanks

[ILLMAS]

8 minutes ago, ILLMAS said:

$150K is correct, it should be half of the $300K.  As for the basis of the property as of 2015 is $380K (500-120 A/D=380), the problem is that the additional $150K in basis was never recognized and the property was sold in 2015, unfortunately everything was done on a shake hand deal and now the TP has a gain of about $120K and recognizing the $150K would help him out.  Any suggestion on how to handle the $150K now?  The refinance happened in 2009 and we are working on 2015 return.

Thanks

I wrote this so fast, I made some grammatical errors now that I re-read it, where is the edit function?