Posted by Dave T on December 11, 2003 at 22:07:12:
I would say no. In your subject to deal, you are taking over a mortgage loan for more than the property’s market value and receiving cash to make up the difference. Sort of like taking out a 125% loan on a $100K property – excess cash from the loan is not taxable income to you.
Since the seller has negative equity, they are giving you cash for their equity. You would reduce your cost basis accordingly.
Just my opinion.